The US Attorney’s indictment against a family of local merchants charged with contraband cigarette trafficking and money laundering reads like the script from a sad soap opera with an all too predictable outcome. But while the outcome of the two-year-long Federal sting operation, which netted 16 arrests in multiple state, was probably never in doubt, the saga seemed to take on a life of its own as the three Berryville residents allegedly sought to build a highly profitable, but equally illegal, enterprise.
In the 76-page indictment, Assistant United States Attorneys Jeb Terrien and Ronald Huber of the Western District of Virginia describe their case evidence against the accused cigarette smugglers citing undercover agents who appear to go out of their way in making sure that the defendants clearly understood that the untaxed cigarettes being purchased were “highly” illegal; instances when both Mohammad Lone Kashmiri and his wife, Farhat Lone Kashmiri, express misgivings about continuing to buy untaxed cigarettes; and at least one instance when undercover agents accepted a return of contraband cigarettes after Mr. Lone Kashmiri discovered he had received ‘soft-pack” Newport cigarettes rather than boxed.
The indictment, released yesterday, alleges that the cigarette conspiracy ran from June 1, 2009 through May31, 2011. During that two year span the government claims that the husband and wife, along with their nephew Farman Ali, purchased some 338,366 cartons of illegal cigarettes.
But while the Lone Kashmiri’s are said to have been responsible for only a portion of the larger $33M cigarette trafficking sting operation, their alleged role is still substantial. The indictment alleges that the Lone Kashmiris illegal purchases totaled $8.6M in untaxed cigarettes.
According to government officials, the criminal motivation that prompted the sting operation is based on tobacco tax disparities between local states. States independently set the sales tax charges per pack of cigarettes. For example, Virginia’s thirty cent sales tax is relatively low when compared to tax rates of over three dollars per pack in places like New York City. Cigarette trafficking involves illegally moving cigarettes across state borders while attempting to avoid paying the sales tax differences.
Although cigarette trafficking is illegal, the profits can be enormous.
In the Lone Kashmiri case, cigarettes said to have been purchased in 2010 carried a retail value of approximately $7,499,340 in Virginia. However, the high tobacco tax in New York meant that the same cigarettes could be sold there for $19M and a whopping $23M in New York City where tax rates are even higher.
But cigarette smuggling carries several financial impacts. Not only can a cigarette smuggler make huge sums of cash, federal investigators say that by selling the contraband cigarettes the Lone Kashmiris deprived the Commonwealth of Virginia of more than $1,012,539 in cigarette taxes. Additionally, the same contraband cigarettes that were transported and sold in other states resulted in the loss of additional tax revenues to those states as well.
It’s not clear how much, if any, profit-risk assessment information was considered as the cigarette smuggling operation commenced. Court documents show a slow but steady increase in illegal cigarette purchases over the two year investigation. The Lone Kashmiri indictment chronicles low-dollar, infrequent purchases at first. However, weekly trips and increased telephone calls to under-cover agents who had set-up a contraband cigarette warehouse in Woodstock, Virginia begin to quickly escalate. The indictment document describes Mohammad Lone Kashmiri contacting federal agents to place cigarette orders, only a few cartons at first, then driving the family van to Woodstock to pick the illegal merchandise.
However, Lone Kashmiri’s tobacco business apparently began to flourish.
Mr. Lone Kashmiri was said to have quickly graduated to using a commercial van to accommodate order quantities that climbed to several thousand cartons and required an additional person to assist with loading the vehicle when visits were made to the warehouse.
Weekly payment transaction amounts soon climbed to over $100K, always delivered in cash.
Mr. Lone Kashmiri reportedly transported the $100K+ payments in a pick lunch box.
But while cash transactions were the preferred payment method, court documents indicate that on at least one occasion Mr. Lone Kashmiri used a more innovative method to settle his debt with undercover agents.
At one point while making a large purchase, Lone Kashmiri reportedly told an undercover agent that he wanted all the Parliament Lights in the warehouse and “everything else that he had asked for.”
The undercover agent told Lone Kashmiri that the cost would be over $40,000 and inquired about the amount of cash Lone Kashmiri had brought with him. Lone Kashmiri is said to have presented the pink lunch bag to the agent. When the undercover agent opened the lunch box he discovered that it held several bundles of cash totaling $49,000, but $1,000 less than the $50,000 cost.
Not to be deterred, Lone Kashmiri is said to have then offered a $1000 scratch-off winning lottery ticket as payment in order to bring the total proceeds to $50,000.
During the two-years that the operation lasted, the indictment also appears to indicate that the Lone Kashmiris may have held second thoughts about continuing their dealings with the undercover agents.
After the one particular deal had been completed, government sources say that Farhat Lone Kashmiri asked to speak privately with one of the undercover agents posing as a cigarette supplier. Ms. Lone Kashmiri reportedly told the undercover agent that she and her husband had been told by a fellow shop owner that the cigarette supplier was actually an Alcohol, Tobacco and Firearms (ATF) agent.
Ms. Lone Kashmiri said that although she did not believe that her supplier was a member of the ATF, she still wanted the supplier to promise that he was not the police.
The undercover officer complied with Ms. Lone Kashmiri’s request and so promised.
The agent also reportedly indicated to Ms. Kashmiri that he understood her apprehension about having untaxed cigarettes in her store and offered to deal directly with her “customer.” Farhat Lone Kashmiri allegedly declined the offer saying that she was fine with the current arrangements but was still worried that the undercover agent might be with the police.
On another occasion Mr. Lone Kashmiri confided to an undercover agent that he was planning to end his cigarette operation involvement soon. But the planned termination never materialized and the Lone Kashmiri’s purchases continued to increase according to court documents.
There were other bumps along the road as well.
On January 19, 2010, Mohammad Lone Kashmiri and co-defendant Malik Ashrif arrived at the undercover warehouse in Woodstock with Ashrif allegedly driving a white Nissan Sentra and Lone Kashmiri in a conversion van. Upon meeting the undercover agent at the warehouse, Mr. Lone Kashmiri confided that one of his associates had been stopped by the police.
Mr. Lone Kashmiri asked advice from the undercover agent about what he could do to recover the $93,000 seized by law enforcement indicating that he had contacted his lawyer about how to get the money back but that his lawyer did not know the true origin of the money.
The undercover agent counseled that although he and Lone Kashmiri knew the money was from illegal activity, no one else needed to know.
Lone Kashmiri allegedly agreed.
But if trust was growing between buyer and seller, the relationship was soon to change as the government clandestinely continued building its case against the Lone Kashmiris.
On January 5, 2010, an undercover agent recovered a GPS tracker from the Lone Kashmiri’s white conversion van used to move cigarettes. The GPS tracker indicated that the van made two stops in Pennsylvania and three stops in New York between December 30, 2009 and December 31, 2009,.
Later in the spring of 2010, Lone Kashmiri and nephew Ali Farman reportedly arrived again at the undercover warehouse in Lone Kashmiri’s conversion van, this time to purchase 7080 cartons of untaxed cigarettes. During the visit agents say that Lone Kashmiri paid $185,600 in cash and Lone Kashmiri told an undercover agent that he was making approximately $2-$3 per each carton of cigarettes that he sold.
Perhaps feeling magnanimous due to the large sum of cash that he was said to have been carrying, Lone Kashmiri also offered to assist in settling a debt owed by his cousin if the undercover agent would allow him to come to the undercover cigarette warehouse four times per week to load his van.
Mr. Lone Kashmiri reportedly offered $2,000 a week towards the debt owed by his cousin in exchange for the extra warehouse visits.
But any hopes held by the Lone Kashmiris or Farman Ali that the two-year venture might somehow come to a good end were shattered on Wednesday as federal agents raided their Berryville and Clearbrook stores and arresting all three.
Now, any profits that might have been made, illegally or otherwise, carry the risk of being be negated in a federal courtroom or lost through a plea deal if the defendants seek to avoid a trial. According to the indictment, the government is seeking to recover not less than $8,500,000 in United States currency, including all interest and proceeds traceable to the funds, including property. The proclamation includes both the 340 Quick Mart in Berryville, Virginia and the Clearbrook Shopping Center, Clearbrook, Virginia, with the government saying that the stores were used to facilitate and conceal the illegal conduct.
In addition, the three face forfeiture of bank accounts, two new vehicles, the Lone Kashmiri’s home on Overview Place in Leesburg, Virginia. A property located in Jackson Heights, New York could also be seized.
Felony jail time is also possible if convicted.
View the federal indictment document here: Redacted Kahmiri Indictment