Truck drivers transported loads of contraband tobacco from North Carolina to Mohawk territory in New York and returned with bags of cash and counterfeit cigarettes as part of a U.S.-Canada smuggling ring that evaded nearly $700 million in taxes, according to federal prosecutors.
It lasted for nine years and the scale was staggering: 6.7 million pounds of tobacco smuggled and around $686 million in lost tax revenue for the Canadian government — all tied to a single farmer who admitted to serving as a broker. The ring involved boats and snowmobiles, and members of the Hells Angels, according to court records.
Details emerged in a U.S. federal court case involving the farmer, Pink Hill, North Carolina, resident Phil Caprice Howard, 55. He was sentenced on Thursday to six-and-a-half years in prison after pleading guilty to conspiracy to commit money laundering and filing a false tax return.
Howard purchased the rag-cut tobacco from warehouses in North Carolina, sold it to smugglers on the Akwesasne reservation, which lies in New York and Quebec, and arranged the transportation with truck drivers, court documents show.
Truck Driver Paid $3,400 Per Load
A driver who cooperated in the case said he determined that Howard was being paid $96,870 per load on the runs he was involved in, court documents show. Prosecutors alleged that Howard made an average of a little over $10,400 per load.
The driver reported that Howard paid $3,400 for him to haul each load of 31,680 pounds, according to court documents.
The drivers were met by the smugglers and a team of baggers who repacked the tobacco. From there smugglers transported the contraband across the St. Lawrence River and into Canada via boats or snowmobiles, according to court documents.
The tobacco then was transported to another Mokawk reservation in Quebec, Kahnawake, with the help of Hells Angels members and others, court documents allege.
Prosecutors: Broker Had Truckers Use Code Words, Fake Bills Of Lading
Howard also went to considerable lengths to conceal the transactions, according to prosecutors.
He "used code words for money and cigarettes when speaking with the truck drivers to avoid detection, and told them to lie to law enforcement if they were pulled over and questioned about why they had tens of thousands of dollars of cash in their truck," Assistant U.S. Attorney Susan Menzer wrote in a May 6 sentencing memorandum.
Howard also had drivers use bills of lading with a false destination when he took payment in the form of contraband cigarettes, Menzer wrote.
The case highlighted the massive business of smuggling tobacco from the U.S. to Canada. In September, Canadian authorities charged multiple truckers in an alleged tobacco smuggling operation that evaded over $300 million in taxes and duties.
In that case, the truckloads went across the border and some were intercepted by Canada Border Services officers.
Truckers ‘Can Be Readily' Found To Do Tobacco-Smuggling Runs
This latest case had drivers avoid the risk of a border inspection. It's unclear if any have faced prosecution in connection with the smuggling.
Menzer, noted, however, that the prosecution of truck drivers in Canadian tobacco smuggling cases hasn't proved an effective deterrent.
"These cases have made little impact since a new truck driver can readily be found to drive the route across the border," she wrote.
Pointing to North Carolina as the "primary source of Canada's contraband tobacco problem," she argued that a "sizable sentence" was needed to deter potential tobacco brokers from selling to smugglers.
Click for more FreightWaves articles by Nate Tabak
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