# A CBS 2 Special Report

Nov 9, 2002 9:30 pm US/Eastern

(CBS) (NEW YORK) Caught on tape, cigarette smuggling in North Carolina. The men our cameras caught were not out just to make a quick buck, they're members of Hezbollah, and the proceeds of their activities went to fund terrorism. Authorities even found a receipt.

Mohamad Youssef Hammoud and 22 accomplices were arrested and convicted, but authorities say this is just the tip of the iceberg, more and more terrorists are thought to be cashing in on this smoke scam.

“The smuggling of cigarettes across state lines has attracted traditionally organized crime and more recently individuals with suspected links to terrorist organizations,” says NYPD Commissioner Ray Kelly.

It's so bad, that Kelly recently addressed a United Nations conference about this worldwide problem, “Our cooperation will deter organized crime and terrorist organizations of an illicit source of funding.”

While undercover agents try and tackle the problem by busting mom & pop stores that sell smuggled cigarettes, the problem, they say, starts with the supplier.

Untaxed cigarettes are bought easily in bulk at local Indian reservations and low taxed cigarettes are smuggled across the border from states like Connecticut. They are then resold netting up to $60,000 a van load and leaving authorities in the dust.

“There wasn't any question, right to the Middle East, right to terrorism and we know it,” says Maryland Comptroller Donald Schaefer.

Authroities caught a Brooklyn husband and wife team, Fouad Safi and Fatima Mazouzi, smuggling untaxed cigarettes into Maryland. The couple were part of a larger bust. The names of more than 200 suspected terrorists smuggling cigarettes into the highly taxed states were turned over to the FBI, 35 more were also residents of New York.

“When we started we didn't know how much was involved and it kept adding up to millions of dollars,” adds Schaefer.

New York and New Jersey have the highest cigarette tax in the country, $1.50 per pack, pushing the price of a pack up to $7.50. Compare that to states with low cigarette taxes and experts say New York State becomes an attractive target for bootleggers and terrorists.

“Obviously with the increase in the cost of cigarettes it's going to continue to be a problem,” adds Kelly.

Kelly also says small struggling businesses unwittingly help terrorists, they buy smuggled cigarettes to beat the tax.

It's estimated that New York will lose close to $40 million dollars to smugglers this year. With so much at stake, ATF says cigarette smugglers better watch out because their plans may end up in smoke

“If that takes us to local individuals, to criminal organizations, up to terrorists, we'll follow the money trail where ever it takes us and we'll make sure we prosecute,” says the ATF’s Joe Green.

So how do you know if you're buying a pack of smuggled cigarettes? Check for the tax seal on the pack.

-- Anonymous, November 19, 2002