In the largest seizure of its kind in New York history, law enforcers nabbed Jordanian Rafea Al-Nablisi, 100 cartons of counterfeit Marlboros, and over two million fake cigarette tax stamps. All told, his fraudulent operation cost the city $6.1 million in tax revenues.

They're orange, dime-sized and hardly noticeable. But those inconspicuous stamps glued to the bottom of cigarette packs each cost legitimate New York City business owners $3 ($1.50 in the rest of the state and $2.57 in New Jersey) and they're proof that taxes on the cigarettes have been paid to New York State.

Recently, Kings County District Attorney Charles J. Hynes and New York State Department of Taxation and Finance Commissioner Robert L. Megna announced the indictment of accused smuggler Rafea Al-Nablisi. State investigators in a sting operation went to his Queens apartment and found piles counterfeit stamps, valued at $6.1 million and intended to be applied to packs of untaxed cigarettes.

Typically, when cigarettes are brought to New York, they are delivered to large distribution centers. The distributors pay New York State taxes and to prove this, they apply a tax stamp to the bottom of each pack of cigarettes. In this case, the counterfeit tax stamps would have been applied to cigarettes which had been illegally diverted away from those distribution centers.

During the sting operation, the 40-year-old Jordanian national paid undercover investigators more than $500,000 for 37,500 cartons of untaxed cigarettes, and sold 516,000 NYS/NYC tax stamps and 645,000 New Jersey state tax stamps. The untaxed cigarettes Al-Nablisi purchased from undercover investigators would have required counterfeit tax stamps before they could be sold in stores. Although Nablisi offered the stamps to the investigators for only 4.5 cents apiece, they cost the state almost 70 times that amount in lost tax revenue.

After Al-Nablisi’s arrest, investigators searched his two storage facilities in Queens, where they discovered additional tax stamps from New York, New Jersey, Kentucky, Virginia and Pennsylvania, and found more than 100 cartons of counterfeit Marlboro cigarettes from China.

The implications in lost tax revenue. The total seizure of 2,178,306 tax stamps, valued at $6,079,112.56, means that if the fake stamps, if used, would have allowed unscrupulous cigarette dealers to evade nearly $6.1 million in state and city taxes. According to DA Hynes, “Taxes on cigarettes contribute essential revenue to the budgets of the City and State of New York…This type of fraud could cost taxpayers in New York up to hundreds of millions of dollars each year, in lost revenue, and we will not tolerate it.”

Commissioner Megna added, "During the past year the Department has stepped up its campaign against tax fraud, targeting in particular those who traffic in untaxed and counterfeit cigarettes. Criminals such as Al-Nablisi deprive the public of millions of dollars in tax revenue that helps support vital public health initiatives, as well as fostering other criminal activity related to these crimes. This indictment continues the Tax Department's commitment to undermine cigarette smuggling and counterfeiting in the New York metropolitan area…"

The implications in health hazards. According to prosecutors, those who smoke these Chinese-made knock-off cigarettes are risking their health because they have no way of knowing whether the tobacco contains toxins – such as pollutants like heavy metals or lead –that are even more dangerous than those already found in cigarettes. Some health surveys indicate that more than a third of New York State smokers regularly buy cigarettes from untaxed sources.

The implications of rising cigarette taxes on contraband tobacco.  Authorities now fear that the big cigarette tax increases that many states are instituting (New York State's planned $1.25 per-pack hike in tobacco taxes will increase the price of a pack in the city to almost $9) are just the thing that will make counterfeit cigarettes even more prevalent and profitable. They argue that the widening price spread between taxed and untaxed cigarettes will surely drive smokers to the black market.

But Al-Nablisi's arrest at least puts a damper on the counterfeit cigarette "industry." He is charged with Criminal Possession of a Forged Instrument in the First Degree, a Class-C Felony, and numerous Tax Law violations. He faces up to 15 years in prison.