By Hillel Aron
By Joseph Tsidulko
By Patrick Range McDonald
By David Futch
By Hillel Aron
By Dennis Romero
By Jill Stewart
By Dennis Romero
Photo by Debra DiPaolo
“The mounting cost of tobacco is simply wonderful, a breath of fresh air,” trumpeted David Geoffrey Collier, a former smoker and drinker who voted for the new tax on smokes demanded by Proposition 10. “Even if it saves just one life, I don’t care what the price is.”
But smokers do. New manufacturer charges and the success of actor-director Rob Reiner’s Prop. 10 tax initiative have turned cigarettes and cigars into rolled gold. For tobacco retailers, the price hike has spurred a rash of burglaries throughout the Southland. And, already scorned by civil society, smokers also face aggressive new undercover measures to bust cigarette butt-heads in bars and restaurants.
The latest series of cost escalations dates to last November’s $206 billion agreement, by 46 states and five U.S. territories, to smoke out Big Tobacco. The four tobacco giants, Philip Morris, R.J. Reynolds, Brown & Williamson and Lorillard — which together control 97.5 percent of the market — decided to stick it to their customers, making them pay part of the expense of the settlement. Per-pack prices went up 50 cents in late November. Prop. 10 raised the tax on all tobacco products 61.53 percent on New Year’s Day, adding another half-buck for a pack.
In May, California will decide how much to add to the new 1999 tax, due to rise again in July. Plus, President Clinton’s unscripted oath in the State of the Union address to sue Big Tobacco on the federal level has already caused some wholesalers to lob on another charge. What cost less than $2.50 a year ago may reach $5 by the end of the year.
Much of this was foreseen by anti-smoking activists, who gleefully await the $700 million windfall that Prop. 10’s passage promised annually for social service, targeting families with children under age 5. The new tax money will also go toward domestic-violence prevention, immunizations and smoking-cessation programs. They may not have calculated another unfortunate aspect of the price hikes: a Prohibition-style surge in crime throughout the region. The target isn’t booze but tobacco.
On December 29, Saad Galal’s M & A Tobacco store in Santa Monica was burglarized by black-market thieves who smashed through the back door of a vacant adjacent building. The thieves used a wrecking tool to knock a 2-and-a-half-foot hole in Galal’s interior wall; within minutes, the burglars absconded with 2,410 cartons of name-brand cigarettes worth $55,000. "My business is already down 40 percent," lamented Galal. "I can’t stay in business with a theft like this."
Galal is not alone. While police deny they’ve encountered a crime wave, retailers report break-ins with the same m.o. across Southern California. In early December, Royal Tobacco of Downey was taken for $80,000 worth of cigarettes and cigars. Downey Distributing lost $35,000 on September 29. G & M Tobacco, in the Riverside County town of Perris, got hammered for $75,000 last year, and smoke shops in Yorba Linda and Moreno Valley lost $75,000 and $40,000, respectively. The Moreno Valley theft occurred just a month ago.
Not all these burglaries came in answer to the price hike. Because it sells so readily, tobacco has long been a favorite target for thieves, and merchants have become accustomed to getting hit.
Last June, for example, pros busted into the pizza store next to the Tobacco Club in Cypress. When manager Omar Gabry arrived at work, he found the telltale hole in the wall and $55,000 worth of smokes stolen. "What gets me is, if a bank is robbed, the ATF, the FBI, everybody shows up," he said wearily. "If we didn’t have insurance and we didn’t have money, then we would be out of business. We would be on food stamps and welfare right now. The system is not helping us much."
Gabry took the unusual step of encasing the entire shop in steel. He also now carries a 9mm to ward off punks like the one who ran into the store a month ago and stole four cartons from Gabry’s wife, who was working alone.
Retailers posit that crime syndicates, primarily Armenian-Russian and Middle Eastern, are pillaging Southland smoke shops. Here again, law-enforcement authorities are not commenting on the allegations, but federal officials acknowledge that organized crime has shown a nose for tobacco.
In testimony before the House Commerce Committee in December 1997, John W. Magaw, director of the Bureau of Alcohol, Tobacco and Firearms (ATF), stated, "In addition to illegal trafficking by traditional organized-crime groups and Native Americans, ATF has also uncovered involvement in cigarette smuggling by Russian, Middle Eastern and Asian organized-crime groups."
State tax authorities are already feeling the pinch. The state Board of Equalization estimates that $50 million in tax revenues is already being lost each year in this new black market, with that figure expected to rise sharply as prices continue to soar.
The tobacco retailers include the government as a culprit. "The only way it’s going to stop is if they get rid of all those taxes," said Greg Reheis, Cypress sales manager for Sam’s Club, the giant wholesale arm of Wal-Mart. His store got ripped off two months ago.
"The same thing is going to happen down here that happened up in Canada," Reheis added. It’s "going to create a large black market. It’s going to happen." Canada increased cigarette taxes by a factor of five in the early 1980s, causing a dramatic spike in black-market crime. The levies were rolled back in 1994, after Canada had lost billions of dollars in tax revenues.