Bureau of Alcohol, Tobacco, Firearms and Explosives
Detroit Field Division
At The Frontline Against Violent Crime
For Immediate Release
August 6, 2009
Contact: SSA Donald Dawkins, PIO, ATF
(313) 202-3578 (office)
(313) 407-6018 (cell)
ATF Arrests Several In Cigarette Fraud Scheme
Federal Arrest and Search Warrants Served in Michigan’s Upper Peninsula
BARAGA, Mich., — Special agents of the federal Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF), assisted by the Michigan State Police (MSP), and the UPSET Narcotics Enforcement Team arrested five individuals on Aug. 5 as part of an ongoing criminal investigation into a contraband tobacco trafficking network alleged to have defrauded Michigan and other states in excess of approximately $9 million announced ATF Detroit Field Division Special Agent in Charge Thomas E. Brandon.
Investigators of MSP’s Tobacco Tax Unit worked alongside ATF agents in this two-year federal investigation. More than 50 law enforcement officers from ATF, MSP, the UPSET Narcotics Team and the Baraga, Mich., Police Department participated in the arrests of five individuals and service of four federal search warrants.
“At a time when Michigan’s economy is struggling, these defendants chose to break the law for their own personal gain by not paying the required state excise taxes on more than 460,000 cartons of cigarettes. They sold the contraband cigarettes out of their businesses, acted as brokers and sold and shipped cigarettes via the U.S. mail, pocketing millions of dollars in revenue that was due to Michigan and other states,” said Brandon. “These defendants also flaunted the cash obtained from these illegal cigarette sales by purchasing numerous high-end sports cars, recreational vehicles and boats.”
Those arrested for their role in the contraband cigarette trafficking scheme are: Joseph Fish, 42; Garrick Lamb, 30; Jay Lewis, 50; Joseph Romano, 48; and John Varline, 42. All defendants were brought before U.S. Magistrate Judge Timothy Greely, Western District of Michigan this afternoon for initial appearances on criminal complaints.
The joint investigation reveals that these individuals conspired to defraud Michigan and other states the proceeds of cigarette taxes. Michigan requires every pack of cigarettes to carry a stamp showing that taxes have been paid. The state’s tax on cigarettes is $2 per pack, making it one of the highest state tax rates in the country.
During the two-year criminal investigation, these defendants allegedly purchased approximately 460,000 cartons of contraband cigarettes.
“Tobacco diversion is a global problem and believed to be one of the largest black markets of legal commodities in the world,” said Brandon. “In the United States alone, billions of tax dollars are lost annually due to the diversion of tobacco products.”
Harold Miron, chief of police for the Village of Baraga, Mich., said, “This enforcement activity was a long time coming. The Baraga Police Department appreciates anytime state and federal resources can help us.”
A conviction for trafficking in contraband cigarettes carries a maximum penalty of five years in prison or a $250,000 fine, or both. In addition, state tax penalties of up to 500 percent of the tax evaded may be assessed, therefore, estimating additional potential fines/tax assessments of approximately $46 million.
A complaint is only a charge and is not evidence of guilt. This is an ongoing investigation, with the potential for future seizures, arrests and additional criminal charges for those already arrested. This case is being prosecuted by Assistant U.S. Attorney Susan E. Gillooly.
ATF is the principal federal law enforcement agency dedicated to reducing violent crime and protecting our nation. ATF is committed to working directly, and through partnerships with state and local law enforcement agencies, to investigate and reduce crime involving firearms and explosives, acts of arson, and illegal trafficking of alcohol and tobacco products.
More information about ATF and its programs is available at www.atf.gov.