LOWELL, Mich. (WZZM) -- A New Jersey man arrested for using stolen credit card information to buy cigarettes is one of several people charged with a tobacco tax fraud affecting scores of victims in Michigan.
Police believe more than 100 people had their credit card information illegally used for tobacco purchases at more than a dozen Admiral stations across the state, including in Lowell, Sparta and Whitehall.
"There are sites that sell this information for anywhere between $1,000 and $10,000,'' said Doug Zloto, assistant special agent for the U.S. Secret Service office in Detroit. "Criminals will then load that stolen credit card information onto gift cards and use it to buy whatever they want, including cigarettes.''
The scam is called skimming. Skimming devices are placed on ATMs or gas pumps. Sometimes it's a store employee who swipes your credit card on a portable device before giving it back. The credit card information is then put on gift cards. And the spending spree begins.
In fall, hundreds of cigarettes were bought using stolen credit card information at an Admiral station in Lowell. An alert store clerk notified police, Lowell police Detective Gordy Lauren said. About the same time, police and banks were starting to get calls from people saying their credit cards were used to buy tobacco products at stores they've never visited, Lauren said.
Lowell police last fall arrested Meko Tyrie Williams and charged him tobacco tax violations and illegal use of a skimming device.
He was picked up after walking out of the Clinton County Jail, where he was serving time for doing the same thing in DeWitt Township near Lansing.
Williams was sentenced last week to nine months in the Kent County Jail. Other arrests are pending.
"We had this come through two years ago with a different group,'' Lauren said. "They were bringing them back to New Jersey and selling them. The group was selling stolen cigarettes out of their van.''
Each year, Michigan loses millions of dollars in tobacco tax revenue to the black market. Cigarettes bought here are going to New York and New Jersey, where the tobacco tax is much higher.
Black market tobacco operations share a common link, according to Michigan State Police Detective Sgt. Karl Schmitz.
"Organized crime for sure, terrorism,'' Schmitz said. "There are definitely big cases out of New York that have been linked back to terrorists that were selling tobacco.''
The black market works both ways. Untaxed tobacco is coming into Michigan. The state police in January seized more than $7,000 in untaxed cigars from a business on 28th Street near Kalamazoo Avenue SE.
"It's a big revenue loss and I think the higher the prices of the product, the more incentive there is to try to get around or try to find a cheaper price,'' Schmitz said. "One way people do that is to buy a product that hasn't been taxed and then they can sell it for a lower retail price.''
Michigan's tobacco tax is $2 a pack. Eleven states are higher, including New York, at $4.35 a pack. Cigarettes sold here must have a Michigan tobacco tax stamp on the bottom of each pack. If there is no stamp, or if the stamp is from another state, it's being sold illegally.
People who violate Michigan's Tobacco Tax law face up to five years in prison. During inspections last year, the Tobacco Tax Enforcement Team seized more than $116,000 in illegal tobacco products.