Illinois men admit to smuggling cigarettes over MN-WI border
Update: Per a December 2017 Washington County District Court order, Iman Ugurlu's offense is deemed to be a misdemeanor.
Two Illinois men accused of transporting the largest load of untaxed tobacco in Minnesota history have pleaded guilty to smuggling charges.
Mohammad Abdul Majid and Iman Ugurlu, both of Bridgeview, Ill., admitted Wednesday in Washington County District Court to bringing $78,000 in unmarked cigarettes over the Minnesota and Wisconsin border last summer.
In accepting their guilty plea, District Judge Tad Jude sentenced Majid and Ugurlu to five years probation for one count of felony aiding in abetting in the sale of untaxed tobacco.
Jude also ordered the men to pay $74,116.18—the taxable value of the tobacco—as well as administrative fees and fines.
The amount is the largest known capture of untaxed tobacco in state history, according to the Minnesota Department of Revenue.
In recent years, the department has ramped up its focus on deterring the sale of untaxed tobacco by partnering with state law enforcement agencies, as well as cracking down local businesses selling the products.
In a statement Wednesday, the department said the case against the suburban Chicago men is part of that ongoing effort.
"This case is a prime example of the partnership we have with local and state law enforcement and shows how we work together to ensure that the state's tax laws are enforced fairly and evenly," the statement said.
According to the criminal complaint filed February in district court, a Minnesota State Patrol trooper stopped Majid and Ugurlu on June 2, 2016, after they missed a weigh-in station along Interstate 94 in Lakeland.
Ugurlu told the officer they were making a delivery to Hudson for his uncle's company, Statewide Distributors Inc., which listed a Beloit, Wis. address, according to court records.
An investigation later found the company's address led to an unrelated bar and grill. The Hudson delivery address is an intersection between a Goodwill and auto body shop on Coulee Road.
Neither company was listed as licensed tobacco distributors in Minnesota or Wisconsin, the complaint said.
Authorities seized the tobacco loaded in the back of the rental truck after the trooper ordered the men drive to the weigh station where law enforcement searched the truck.
A Minnesota Department of Revenue inspection estimated the retail value of the tobacco to be more than $78,000.
Minnesota taxes tobacco products at 95 percent of the wholesale value, the fifth highest in the country.
By avoiding excise taxes, officials said it creates unfair advantages for businesses and deprives the state of thousands of dollars in skirted tax revenue.
"You can undercharge your competition and still make money hand-over-fist by not paying the tax because tobacco is taxed a great deal," said Fred Fink, the criminal division chief in the Washington County Attorney's Office.
Black market vendors typically sell unmarked cigarettes to local tobacco stores and shops from low-tax states, such as North Dakota, to high-tax states like Minnesota.
Other times, they avoid paying federal and state taxes entirely by counterfeiting brand-name cigarettes or by robbing delivery trucks and wholesalers.
Stores then buy unmarked tobacco products and pocket the remainder while charging average retail prices.
Catching illegal tobacco runners can sometimes be difficult, Fink said, because law enforcement agents need a reasonable suspicion before searching and stopping vehicles. But once someone brings a certain amount of tobacco over state lines, they are responsible for paying state taxes, he said.
In Minnesota, distributing, selling or possessing more than 20,000 unstamped packs of cigarettes — or an unpaid tax value greater than $1,400 — is a felony.
According to a recent study by the conservative-leaning think tank Mackinac Center for Public Policy, about one-third of cigarettes consumed in Minnesota were smuggled smokes in 2014.
The 2016 study also suggested untaxed tobacco sales increased after state lawmakers raised tobacco tax rates in 2013.