Cook County cracks down on black market cigarettes

The I-Team exposes a tobacco underground in Cook County, where profits are as high as dealing drugs-- all at taxpayers' expense.
November 13, 2013 2:41:59 AM PST
The ABC7 I-Team takes us inside Chicago's tobacco underground. We open the door on a deepening black market of bogus and illicit cigarettes, made more lucrative than ever as the government continues to raise tobacco taxes.

The I-Team exposes a tobacco underground in Cook County, where profits are as high as dealing drugs-- all at taxpayers' expense.

Smokers who refuse to pay full price-- as high as $12 a pack-- turn to an easy access black market. There, for every pack of bootleg or fake cigarettes sold without a county tax stamp, taxpayers lose millions.

The I-Team went along with the Cook County Department of Revenue and sheriff's police as they raided three suburban stores and fined all of them for selling cigarettes without county tax stamps.

Police say illicit cigarettes were found buried beneath floorboards and squirreled away in cabinets. The I-Team was shown one stash at the end of this long hallway in a cramped toilet room, in back of the door and behind the looking glass. County fines charged for this morning's work? More than $33,000.

ABC7 Eyewitness News' Chuck Goudie asks: "Sir, why are you selling cigarettes like that?"

'We gotta live', this shop owner says, trying to stay competitive in a cigarette market where prices soared again last spring as the county upped the tax by a dollar a pack.

"There are a number of black market organizations including several of the major gangs in the city of Chicago that now feel it's worth their while to go to other states like Indiana and Missouri in particular," said Ken Harris, Deputy Director of Revenue Cook County.

"You can make so much money on it, it's so lucrative, so lucrative and it's low risk. We caught five over the last six months and these are just traffic stops by police and they find cigs in the cars," said Commander Mike Anton, Cook County Sheriff.

A Tinley Park man was recently arrested during a south suburban traffic stop with 2,000 packs of cigarettes-- none with state tax stamps, a class 3 felony.

For 22-year-old Ahmed Damooney, selling cigarettes from Missouri would mean big money. Missouri has the lowest state tax in the nation at just $0.17 a pack. The national average is $1.50, and Cook County smokers pay $6.67. And if Mayor Emanuel's city tax hike takes effect, Chicago smokers will pay the highest in the nation at $7.42 per pack.

So those 2,000 packs from Missouri could have brought Illinois and Cook County $13,000 in taxes. Instead, that money would be profit for the black market.

"We have significantly more investigators out on the street we are almost doubling the size of our investigation staff," said Harris.

The Cook County Revenue Department added eight investigators the past year costing nearly $350,000. They've brought in more than $9 million in cigarette taxes and fines. The county estimates another $6 million in 2014.

Bob Warnock heads revenue's investigations. His team relies on tips from store competitors, local police and a tip line.

If the guilty party pays their fine:

"The tipster will get paid anywhere between $250-$1000," said Bob Warnock, manager, investigations, Cook County Department of Revenue.

Investigators are also on the lookout for counterfeits.

"People who smoke tell us you can instantly tell the difference. We don't know what's in them," said Cmdr. Anton.

So the I-Team had a private lab test some fake smokes. This is what's inside a real Newport.

"Good cigarettes are made from tobacco leaves. That's what they are supposed to mostly be," said Skip Palenik, senior research microscopist.

But our analysis revealed what is inside the counterfeit Newports from China: up to 95% chopped-up stem fibers.

"It's simply not much tobacco leaf which is what cigarettes are supposed to be made of. This is mostly tobacco stems," said Palenik.

The Tinley Park man arrested with 2,000 cigarettes in his car is out on $100,000 bond and has pleaded not guilty. In addition to the criminal felony charges, he was fined $51,000 by the Cook County Department of Revenue. The blurred faces in our video were undercover investigators who asked not to be identified.

Additional information:
Cook County Tobacco Tax Information
Cigarette Tax Reward Program/Submit a Tip

Cigarette Tax Reward Program FAQs

What is a Cigarette Tax Violation?
Citizens who purchased cigarettes from, and/or has knowledge of a retailer in the possession of the cigarettes on which the Cook County Tobacco Tax Ordinance, Cigarette Tax has not been paid (see example violations below), may report such purchases, sales, or possession to the Cook County Department of Revenue, by use of the reporting guidelines below:

  • Unstamped Packs, sales or possession for sale in Cook County, packs of cigarettes on which the Cook County Cigarette Tax Stamp is not attached or affixed

  • Taped-On Tax Stamps, sales or possesses for sale in Cook County, packs of cigarettes on which the County Cigarette Tax Stamp is taped, attached or affixed by an adhesive tape (i.e. scotch tape, masking tape, etc.)

  • Loose Cigarettes, which means, sales or possesses for sale in Cook County, un-packaged single or individual cigarettes.

What are the chances a TIPster will be rewarded?
The Cook County Department of Revenue wins more than 90% (findings of liable/ guilty) when cases are taken to Administrative Hearing. Reported TIPs have more than a 9 in 10 chance of being rewarded!

How do I report tips?
Please click on the link above or call 312-603-2585 to report via telephone.

Can a person choose to leave an anonymous tip?
Yes, on both the voicemail and the website identity is not required. However, both clearly state electing to report anonymously forfeits any and all rewards.

How long will a payout take?
This may vary based on individual circumstances. Once the method of payment clears and the administrative tasks occur, payment will be dispatched. Under normal circumstances it will take approximately 3 months, but if a case is delayed or the violator has unique circumstances it may take much longer to fund the reward.

Are there any restrictions to the program?
Currently, the only restriction is no Cook County employee may benefit from the program.

Is the Tip Line or Website available in languages other than English?
The Website is provided in English only. A dialogue box provides instructions in Spanish and directs those TIPs to the TIP Line.


Load Comments