AG’s office helps shut down interstate cigarette trafficking operation

Proceedings in the federal trial of Wissam and Bassam Khalil of Rhode Island were halted last Thursday after the brothers pleaded guilty to their roles in a smuggling scheme that trafficked more than 6 million cigarettes from Virginia to Rhode Island over a two year period.

This is the result of a multi-jurisdictional investigation which included extensive work and testimony by investigator Michael Wyatt of the Attorney General’s Tobacco Enforcement Unit. Seven people have been arrested on a variety of federal charges since the investigation began in 2012.

“Smuggling operations like this are essentially a form of organized crime that costs taxpayers millions of dollars in lost revenue each year,” said Attorney General Mark Herring. “Collaboration and coordination among state and federal partners were key to breaking up this multi-state operation. I appreciate the professionalism and hard work of my Tobacco Enforcement Unit in helping to put an end to this ring.”

In 2012, the Attorney General’s Tobacco Enforcement Unit received information indicating suspicious purchases of cigarettes by what turned out to be shell corporations using rented retail storefronts in Virginia. According to court documents, more than 30,000 cartons of cigarettes were purchased from retailers by four shell corporations in Virginia and illegally ferried to Rhode Island between July 2011 and May 2013. The operators sold the product at full price, keeping the difference between Virginia and Rhode Island tobacco taxes as profit. Approximately $1.1 million in Rhode Island tax payments were avoided during the scheme, which even utilized a military uniform-clad criminal in a car bearing “Rhode Island War Veteran” plates to decrease suspicion during much of the illicit transportation.

Sentencing in this case is scheduled for September. This legal victory is the result of the combined efforts of numerous state and federal partners including the Virginia Attorney General’s Tobacco Enforcement Unit, United States Attorney for the District of Rhode Island Peter F. Neronha, Virginia State Police, the Virginia Department of Taxation, the Northern Virginia Cigarette Tax Board, the Rhode Island Division of Taxation, the Rhode Island Department of Attorney General, Rhode Island State Police, and the Cranston and Providence Police Departments.