Cigarette Smuggling Terror Probes Called Sloppy

Sting operations aimed at black market cigarettes in New York had such weak investigative protocols and financial controls that money went missing and prosecutions were dismissed, the state inspector general reported Monday.

In one case, the Department of Taxation and Finance couldn’t account for $160,000 of lost cash from covert sales, Inspector General Catherine Leahy Scott said.

Scott detailed several other problems: investigators bringing their own semi-automatic rifles to out-of-state operations, informants paid by checks made out to cash and failure to record transactions on camera.

“In its effort to undermine the black market sale for cigarettes, PATB’s flawed sting operations lacked textbook safeguards to ensure the legitimacy, integrity and effectiveness of the stings,” Scott said. Its “neglect of basic investigative protocols” eventually resulted in dismissed prosecutions and ended the sting operations in summer 2010, she said.

According to the inspector general’s report, the department has ceased the covert stings that began in 2002, closed all related bank accounts and all managers involved have left or were relieved of duties. Tax officials have begun coordinating their law enforcement with state police, the report said. They also issued new policies on confidential informants, who had been paid “hundreds of thousands of dollars,” now requiring registration and better controls and tracking of payments.

Records following search warrants in October 2005 showed 31 arrests and convictions for tax evasion with at least 10 defendants put on payment plans for $376,000 in restitution but only $85,000 paid so far.

In May 2008, 24 arrest warrants in the New York City area and Virginia led to 18 guilty pleas to charges including sale of contraband cigarettes and money laundering. Of some $4.2 million in restitution ordered to New York, the tax department has received only about $17,000, the report said.

The $160,000 disappeared from “Operation Keystone,” a two-year investigation based mostly in Pennsylvania that ended in Westchester County in 2009. It involved undercover sales of over 470,000 cartons of cigarettes with nearly $17 million in proceeds.

The office said a PATB senior investigator, his wife and another bureau employee suspiciously deposited a total of $25,000 in a private account. That was referred to the Westchester County DA, who decided not to prosecute. The investigator resigned, the report said.

This article appeared in print on page 5 of the May 21st, 2013 edition of Hamodia.