A multimillion-dollar cigarette smuggling operation based in Michigan allegedly helped fund the Hizballah terrorist organization (also known as Hezbollah), according to a federal indictment of 19 men that was announced March 29.
Nine members of the alleged smuggling operation were arrested on the day of the announcement. One other man surrendered later. The others remain at large and are believed to be living in Lebanon or elsewhere in the Middle East, where Hizballah is based.
The indictment says the smuggling operation evaded “tens of millions in state cigarette taxes” and funneled illegal proceeds to the terrorist organization. Most of the smuggled cigarettes were sold in Michigan and New York, sometimes with counterfeit tax stamps to make it appear the proper state taxes had been paid.
The group would buy low-taxed cigarettes in North Carolina and untaxed cigarettes at the Cattaraugus Indian Reservation in New York and bring them into Michigan and New York State, which have high cigarette taxes, according to the indictment. New York State’s tax is $1.50 a pack. Michigan’s is $2 a pack, at press time fourth-highest in the country. The smugglers would then resell the cigarettes at market prices, resulting in illegal profits that were steered to Hizballah, according to the U.S. Attorney’s office.
Other Items Pirated
Though most of the smuggling involved cigarettes, the enterprise also sold phony Viagra, Zig-Zag cigarette papers, and stolen toilet paper and baby formula, according to the indictment.
More than a half-dozen federal, state, and local law enforcement and regulatory agencies were involved in the investigation, including the U.S. Attorney’s office for the Eastern District of Michigan, the Federal Bureau of Investigation, and the Bureau of Alcohol, Tobacco, Firearms, and Explosives (ATF).
“Investigating contraband cigarette trafficking has been, is, and will continue to be, a top priority for ATF, particularly when there is nexus to a known terrorist organization such as Hizballah,” said Valerie J. Goddard, ATF’s special agent in charge in Detroit, in a statement March 29.
The suspects arrested March 29 were all captured in or near Dearborn, Michigan. They were identified as Karim Hassan Nasser, 37, of Windsor, Ontario; Fadi Mohamad-Musbah Hammoud, 33, of Dearborn; Majid Mohamad Hammoud, 39, of Dearborn Heights; Jihad Hammoud, 47, of Dearborn; Youssef Aoun Bakri, 36, of Dearborn Heights; Ali Najib Berjaoui, 39, of Dearborn; Mohammed Fawzi Zeidan, 41, of Canton; Imad Majed Hamadeh, 51, of Dearborn Heights; and Adel Isak, 37, of Sterling Heights. Theodore Schenk, 73, of Miami Beach, Florida, voluntarily surrendered himself for arraignment on April 10.
Operation Spanned Continents
Susan Plochinski, a spokesperson for U.S. Attorney Stephen J. Murphy, said the United States does not have an extradition treaty with Lebanon, where several key figures in the smuggling operation are believed to be living. She could not say whether more indictments or arrests are expected. She said the investigation is continuing.
The enterprise operated from Lebanon, Canada, China, Brazil, Paraguay, and the United States, according to the indictment.
Plochinski said the indictment was handed up in April 2004 but kept secret until the March 29 raids, in hopes more members of the organization could be identified. Federal agents decided to act when Karim Hassan Nasser crossed from Canada into the United States.
A Smuggling Hotbed
The case is not an isolated occurrence of smuggling or other illegal activities involving tobacco products in Michigan or Michigan residents.
In May 2005 four residents of Windsor, Ontario were charged in Ontario courts with smuggling and possession of 642 cases of “unstamped” tobacco products that apparently had been brought into Canada from Michigan, suggesting Michigan has become a distribution hub for cross-border smuggling.
In April 2005 Ohio law enforcement officials arrested a Jordanian-born resident of Dearborn for illicit tobacco trafficking and seized more than $1 million in tobacco products from him.
In October 2004 a truck holding 135 cases of cigarettes worth more than $27,000 was hijacked in Washtenaw County, Michigan after the thieves pistol-whipped and blindfolded the truck’s driver.
The indictment announced March 29 alleges Imad Hammoud, along with his partner, Hassan Makki, ran a multimillion-dollar-a-year smuggling operation based in the Dearborn area between 1996 and 2002. Makki pleaded guilty in 2003 in federal district court in Detroit to racketeering and providing material support to Hizballah.
Some of the cigarettes were supplied to the organization by Mohamad Hammoud, who in 2002 was convicted of several crimes in federal district court in Charlotte, North Carolina. The crimes included racketeering and providing material support to Hizballah.
Makki and Mohamad Hammoud are in prison for their criminal convictions. They were not charged in the indictment announced March 29 but were identified as unindicted co-conspirators.
Michael D. LaFaive ([email protected]) is director of fiscal policy at the Mackinac Center for Public Policy in Midland, Michigan.