A Staten Island man's lucrative cigarette-smuggling business went up in smoke this week, authorities announced Friday, after a seven-month investigation revealed he was in possession of over half a million untaxed cigarettes.
Michael Zekry, 67, was pulled over by police in the New Springville section of Staten Island early Wednesday morning while driving a white van, the Richmond County's District Attorney's Office said. A search of the vehicle allegedly uncovered over 2,000 cartons of cigarettes, all with stamps indicating that they were from Virginia.
After obtaining a search warrant, officers found another 550 cartons of Virginia-stamped cigarettes inside Zekry's apartment, along with $40,000 in cash and a cash-counting machine, authorities said.
"I go to Virginia every 10 weeks," Zekry allegedly told investigators. "I make between $5,000 to $7,000 on a load. A carton sells between $40 to $50."
When all was counted, police said they found 25,860 packs of out-of-state cigarettes in Zekry's apartment, which comes out to 517,200 individual cigarettes. He allegedly intended to sell them to grocery stores and nail salons across Staten Island and Brooklyn.
Due to steep state and local taxes, cigarettes in New York City are expensive. Smugglers often make trips down south, where tobacco prices are lower, buy up thousands of cartons, and then distribute those cartons to bodegas and other stores at a profit. The bodegas, in turn, sell the cigarette packs for around $8, or individual cigarettes -- also called "loosies" -- for 75 cents.
Each pack of cigarettes in New York City has a combined state and city tax of $5.85, which for 25,860 packs would come out to more than $150,000 in city and state taxes.
"Months of dedicated police work by my NYPD Detective Squad has put him out of business and taken more than a half million illegal cigarettes off the streets," said District Attorney Daniel Donovan in a statement. "I'm proud to be a member of the New York State Cigarette Strike Force and want to thank Taxation and Finance Commissioner Thomas H. Mattox for his agency's assistance with this case."
At the beginning of this year, Gov. Andrew Cuomo announced the creation of the New York Cigarette Strike Force to fight cigarette smuggling in the state. In its first six months, the Strike Force seized $1.7 million in cash and contraband that included 2.7 million cigarettes.
According to officials in 2011, New York state was losing $525 million in tax revenue a year due to smuggling. A study by the Tax Foundation earlier this year found that 57 percent of cigarettes consumed in New York were illegally smuggled into the state.
Zekry was arraigned Wednesday on charges of tax fraud. He was released on $10,000 bail and is expected back in court on Monday. If convicted, he faces up to four years in prison.