SCITUATE, R.I. — Four Syrian men are facing charges they participated in a cigarette smuggling ring in Rhode Island that relied on cigarettes from southern states with lower cigarette taxes to swindle the cash-strapped Ocean State out of an estimated $5.7 million in tax revenue, authorities said Wednesday.
Investigators say the ring is the biggest in state history, including the seizure of more than 168,000 cigarette packs in Rhode Island, Virginia and South Carolina over two days, according to state police superintendent Col. Steven G. O’Donnell. He added 15 Rhode Island stores were caught selling contraband cigarettes.
State tax administrator David Sullivan said authorities are reviewing the stores where contraband cigarettes were seized. The stores could lose their licenses and face hefty fines, he said.
The nearly yearlong investigation resulted in state charges against three Rhode Island store owners, O’Donnell said. The alleged ringleader, Mohamad Mohamad, 35, of Cambridge, Mass., is facing federal charges, according to officials. Facing state charges are Wassim Khiami, 47, of Warwick; Wad Alkhiamy, 59, of Johnston; and Tarek Shikh Alard, 41, of Cranston, O’Donnell said.
Mohamad was ordered Wednesday in U.S. District Court in Providence to remain in home detention pending his trial. He was arrested on Tuesday for possession of fraudulent state tax stamps, money laundering, distributing contraband cigarettes and other charges.
Khiami owns two convenience stores in Cranston and Providence. Alard owns a convenience store in Providence, and Alkhiamy owns a store in Johnston, state police said. Sullivan said their businesses remain open.
He said the men carried out the scheme like drug traffickers, concealing the contraband cigarettes in hidden compartments in their stores. He said Mohamad was initially suspected of drug trafficking.
“They are not mom and pop operations,” O’Donnell said.
An affidavit prepared by U.S. Department of Homeland Security Agent Joseph A. Sullivan shows Mohamad traveled to North Carolina, South Carolina and Virginia to get cigarettes to sell in Rhode Island, where the tax is $3.46 per pack. The tax is 57 cents per pack in S.C., 45 cents per pack in N.C. and 30 cents per pack in Va., Sullivan wrote.
State police started investigating Mohamad last December after getting reports about him engaging “suspicious activity” at odd hours at a storage unit he rented in Warwick.
Authorities began watching Mohamad, tracking him during trips in March to North Carolina, South Carolina and Virginia in August, Sullivan wrote. Investigators observed him driving in rented cargo vans and visiting stores that sold cigarettes, including a Wilson, N.C., business that sold cigarette tax stamps, the affidavit said.
In some cases, investigators witnessed Mohamad leaving stores with black trash bags filled with unknown materials, Sullivan wrote.
Authorities also gained access several times to Mohamad’s Warwick storage unit with a “covert entry” warrant, Sullivan wrote. The warrant did not permit investigators to seize evidence, but they did note finding as many as 120,000 cigarette packs during one visit and locating 4,800 fraudulent tax stamps on another occasion, the affidavit said.
Officials also learned Mohamad rented storage units in Rocky Mount, N.C., and Columbia, S.C., Sullivan wrote.
During the probe, officers also visited several Rhode Island convenience stores, where they purchased cigarettes with Virginia tax stamps or no tax stamps at all, the affidavit said. Mohamad was also observed visiting the homes of Alkhiamy and Alard. Alard faced similar state charges two years ago, but online court records show a judge dismissed the case.
Khiami and Alkhiamy were released after appearing before a bail commissioner on the condition they pay $10,000 each if they miss a court date, authorities said. Alard was detained as a bail violator. They are charged with importing cigarettes to evade taxes and sale of unstamped cigarettes. Khiami is also charged with tampering, forgery and counterfeiting of tax stamps, police said. Alard is also charged with escape from detention.
Khiami and Alkhiamy did not immediately return messages on Wednesday. It was not immediately clear whether the men have lawyers.
Mohamad runs Adam Forest Product, Inc., an import-export business based in Cambridge, Mass., although Sullivan wrote the money deposited into the business’s bank account appeared to be tied to contraband cigarette smuggling.
He is also accused of trying to launder thousands of dollars through his sister-in-law, Sullivan wrote.
Mohamad has not entered a plea. Defense attorney Terence F. Livingston did not return a message Wednesday seeking comment.