12 Investigates: Black market cigarettes

People are making a fortune selling cigarettes on the black market. It's a billion dollar criminal enterprise that brings with it, guns, drugs and violence. The parent company of Philip Morris USA, Altria, which owns about half of the US cigarette market, has an entire division devoted to spotting fake cigarettes. "Job one is to protect the integrity of the brands, the integrity of the legitimate retailers where it's sold," said Joe Murillo, a vice president and Associate General Counsel for Altria. The company isn't just dealing with copy-cat cigarettes either, people are smuggling smokes out of Virginia and re-selling them in states like New York.

Here's the problem: in Richmond, a pack is taxed .30 cents. In New York City, the tax is $5.85. That's a profit of $5.55 a pack. The justice department estimates states are losing around $5 billion a year in tax money. People are even stealing Virginia's dollars by counterfeiting commonwealth tax stamps placed on the packs. Cigarette smuggling is more profitable to criminals than heroin or cocaine and are found in the same circles as money laundering, gun smuggling, and drug trafficking. "Oh, without a doubt, it's organized crime. This is organized crime at it's highest level because of the sophistication," said Rich Marianos, a special agent for the Bureau of Alcohol, Tobacco, Firearms and Explosives.

The police are leaning more and more on the cigarette makers to help them catch the criminals. "Our goal is to protect the legitimate channel of distribution and these illicit sales that are being done out of vans and boot legging are not legitimate retail sales," said Murillo. About 10 years ago, Altria created its brand integrity department. Altria invited us inside its evidence room at its Henrico County headquarters. This is where cigarettes from actual criminal cases sometimes end up. Here inspectors are trained to spot the fakes. With magnifying glasses, they look for covert features on the packages. They even check the quality of the actual cigarettes.

China is the biggest maker of fake cigarettes sold in the US. "Counterfeit cigarettes are made under really terrible conditions. abroad. many times in china in factories that are in caves," said Murillo. There's another way these inspectors can catch the fakes. Under a black light, some counterfeit cigarettes packs will actually glow. Altria even monitor's markets. looking for strange trends in sales. to lead police to the smugglers. "We don't want our product used in any criminal activity. Our product is for adult Marlboro smokers and that's where we want to keep it," said Murillo. Altria's also protecting its bottom line. Every time a fake pack of cigarettes is purchased, it takes money out of Altria's pockets.