A diagram shows the hierarchy of the scheme and those arrested.
Where's the money?
Federal authorities Thursday scrambled to find millions of dollars in profits a smuggling ring that sold cheap cigarettes to bodegas across New York may have used to fund terrorism in the Middle East.
Three of those charged in the sophisticated conspiracy were linked to known terrorists, including Hamas, the group that controls the Gaza Strip and has vowed to wipe Israel off the map, officials said.
“We’ve only recovered a small fraction of the money,” said state Attorney General Eric Schneiderman in announcing enterprise corruption charges against 16 defendants. “We’re very seriously concerned about where that money went.”
Over the last 17 months, authorities say the ring bought $55 million worth of cigarettes in Virginia, trucked it to New York and sold packs tax-free to small stores across Brooklyn, the Bronx, Queens and Staten Island.
By selling the packs cheap, they cheated the state out of $80 million in taxes and dramatically increased their take, authorities said.
Investigators in the case, dubbed Operation Tobacco Road, have so far found evidence the group pocketed $22 million in profits, of which authorities have found only $7.8 million in cash and bank accounts.
“While it hasn’t been established yet where the illicit proceeds ended up, we’re concerned because similar schemes have been used in the past to help fund terrorist organizations like Hamas and Hezbollah,” Police Commissioner Raymond Kelly said.
All 16 of those charged are Palestinian and all but two were living illegally in the U.S. One managed to flee to Jordan before the arrests late Wednesday.
Kelly said the group included several “individuals on our radar with links to known terrorists,” starting with Mohannad Seif, 39, a cigarette reseller from Brooklyn.
Kelly said Seif lived in the same three-story walkup with the personal secretary of Hamas’ main fund-raiser in the U.S., Mousa Abu Marzouk, who was deported from the U.S. in 1997. Marzouk continues to raise money for Hamas in Egypt.
The NYPD also linked Muaffaq Askar, 46, a reseller in Brooklyn, to the Arab gunman who shot up a van full of yeshiva students on the Brooklyn Bridge in 1994. The gunman, Rashid Baz, killed 16-year-old passenger Ari Halberstam.
At the time, Baz claimed it was a case of road rage, but the incident has since been recategorized as a terrorist hit. On Thursday, Kelly said the Halberstam murder was “still open.”
He revealed Askar was a “confidant” of Baz who considered Askar his “Palestinian uncle.”
Defendant Youssef Odeh, 52, of Staten Island, had financial ties to the imprisoned blind sheik, Omar Abdel-Rahman, who was convicted in a 1993 plot to blow up New York landmarks, Kelly said.
Before he got into the cigarette business, Odeh sold baby formula. In the early 1990s, the sheik invested $10,000 in Odeh’s business, Kelly said.
That transaction was arranged by Rahman’s then-spokesman, Ahmed Sattar, whom Kelly identified as a close friend of Askar.
Sattar was convicted in 2005 of smuggling out of prison what prosecutors described as “words of hate” from Rahman to the world, including a fatwa to “kill (Jews) wherever they are.”
Before his arrest, Sattar — who likely believed he was under surveillance — made calls overseas on Odeh’s cell phone.
If the ring is funding terrorism, it picked a highly lucrative business to do so, authorities said. As one defendant caught on tape stated, “This business is better than selling drugs.”
The accused ringleaders, brothers Basel and Samir Ramadan of Ocean City, Md., bought cigarettes from a Virginia wholesaler, Cooper Booth Wholesale Inc., which shipped them to a public storage facility in Delaware, prosecutors said.
Cooper Booth President Barry Margolis did not return calls seeking comment.
A portion of the profit was based on the difference in cigarette taxes in Virginia, where they are 30 cents per pack, and New York, where they are $5.85 per pack.
The Ramadans purchased their cigarettes for $40 per carton and sold to their distributors for $50 a carton. They, in turn, sold to bodegas for $60 a carton — a huge discount from the usual $120 cost per carton, which includes taxes.
The brothers paid the Virginia tax with the promise that they’d sell only in Virginia, but instead shipped their wares to New York. They affixed fake tax stamps to the packs but sold them to distributors tax-free — greatly reducing the normal New York price of $12 per pack.
Several times a week, Adel Abuzahrieh, 42, of Brooklyn, drove a white box truck covered in graffiti from New York to meet the brothers in Delaware, authorities said.
He’d drop off black garbage bags filled with cash and leave with thousands of cartons of cigarettes — up to 20,000 a week, prosecutors say. The brothers would show up at small local banks with beer coolers filled with cash to deposit.
Abuzahrieh always took the same return route and met distributors in parking lots behind malls and Home Depots. Distributors loaded boxes of cartons into car trunks, then began the process of selling them directly to bodegas or to resellers, who’d do the same.
The untaxed packs were offered to smokers at a discount at Arab markets and grocery stores in Brooklyn, Staten Island, Queens and the Bronx.
All the defendants pleaded not guilty in Brooklyn Supreme on Thursday and were held on bails ranging from $75,000 to $500,000.
Lamis Dee, a lawyer for Odeh and two other defendants, brought up recent accusations about the NYPD spying on Muslims and claimed Kelly was blowing a “simple untaxed cigarette case” into something it’s not.