06/17/2008 05:12 am ET | Updated May 25, 2011

Bootlegged Cigarettes On The Rise As Price With Taxes Approaches $10 A Pack

When Matthew Anderson, a burly 35-year-old senior state tax investigator, walks into a cluttered grocery store in Kensington, Brooklyn, he knows to follow the clerk's eyes. "As soon as you say 'I'm here to do the inspections on cigarettes,' the eyes go to where the stuff is," he says.

Inside, as Anderson's partner inspects a rack of cigarettes above the register with a black light for counterfeit tax stamps, the clerk, Kamalbir Singh, keeps glancing at the shelving near his feet. They find 134 packs of Newports and Marlboros with apparently counterfeit tax stamps hidden underneath the cash register. Another 760 packs of what appear to be illegally imported John Player Gold Leaf cigarettes are found in secret compartments underneath some shelves.

The underground trade in cigarettes is thriving across New York, and it's about to get worse. On June 3, the state cigarette tax increased by $1.25, to $2.75. With the $1.50 city tax, the total retail price for a pack is now the highest in the country--around $9. T

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