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Cigarette seizures put Md. into sales; State law requires auctioning of packs; hypocrisy claimed


Even as Maryland embarks on a multimillion-dollar anti-smoking campaign, the state is planning to auction off thousands of cigarettes for a profit.

Officials say they have no choice: Under state law, they must auction off the cigarettes, seized from smugglers hoping to avoid Maryland's high cigarette tax. But the auction has drawn heated criticism from anti-smoking groups and state officials who recently endorsed a plan to spend millions on cancer research and programs to stop residents from smoking.

"It's a hypocritical practice," said House Speaker Casper R. Taylor Jr. "Either we want people to quit smoking or we don't."

Since July, when a tax of 66 cents per pack went into effect, agents with the state Comptroller of the Treasury have seized more than 170,000 packs of cigarettes, which are kept in basement storage rooms at the Treasury office in Annapolis. Two rooms are stacked from floor to ceiling with Marlboros, Newport Lights and other brands; the other room is just beginning to fill up.

Most of those cigarettes were seized from smugglers who buy cigarettes in neighboring states, mostly Virginia, hoping to sell their contraband in Maryland.

The comptroller enforces Maryland's tobacco tax laws, and Comptroller William Donald Schaefer has been pushing his agents to arrest more smugglers since he took office last year.

Though there have been discussions in Schaefer's office about destroying the cigarettes after criminal cases are finished, agents have no choice but to sell them, thanks to a state law that requires the comptroller to auction the tobacco products to nonprofit groups, licensed cigarette wholesalers or manufacturers.

Anti-smoking advocates and state officials would like to see that changed and allow Schaefer to destroy the cigarettes.

"He's missing a wonderful opportunity," said Michaeline Fedder, director of advocacy in Maryland for the American Heart Association. "A big bonfire. Let him use it as a warning to other people who think they can bring cheaper tobacco products in from surrounding states."

For his part, Schaefer said he would love to destroy cigarettes.

"If they give me the authority, we'll destroy them and do it so people can see it," he said. "We'll make it dramatic."

But Schaefer bristled at suggestions it was hypocrisy to confiscate cigarettes and then sell them. He said the settlement Maryland and other states reached with the tobacco companies did the same thing.

"To pay for the health bills, they get the money from the cigarette manufacturers," said Schaefer, who lobbied heavily to increase the state's cigarette tax while governor. "The only way for them to pay that is to sell more cigarettes. Don't you think that's hypocrisy on the highest level?"

At the last auction, in March of last year, officials sold 80,578 packs of cigarettes for $140,685, which was deposited in the state general fund.

Most of those cigarettes were sold to manufacturers, who wanted to prevent stale products from reaching consumers, and they recycled the cigarettes into other tobacco products or destroyed them, state and industry officials said.

The state could reap as much as $500,000 at the next auction by selling off its cigarettes, said Dale Irwin, assistant director of field enforcement division of the comptroller's office.

"It helps defer some of our operating expenses," he said.

The next auction should be held in several months, officials said.

With thousands of cigarettes ready for sale, some state officials think it's time to change the law to exempt the sale of tobacco because wholesalers might buy a significant share.

"The governor says we need to take a look at the law," said Michael Morrill, a spokesman for Gov. Parris N. Glendening, after being informed by The Sun of the auctions. "The state has a very clear and strong message: Cigarette smoking is not good for your health."

This month, the General Assembly and Glendening endorsed a plan to spend $300 million over 10 years on anti-smoking campaigns. That money comes from the state's share of the national tobacco settlement, an estimated $4.2 billion over 25 years.

About 22 percent of Maryland residents smoke, and 7,500 Maryland residents die each year from smoking-related illnesses, according to the anti-smoking groups. Countless others are left seriously ill from years of smoking.

Wholesalers buy cigarettes from such manufacturers as Philip Morris and affix the 66-cent Maryland tax stamp to each pack. The tax is passed along to consumers.

Maryland has lost more than $113,000 in taxes on the seized cigarettes since July, officials say. And most say smugglers are making a good living buying bundles of cigarettes in Virginia, where the tax is 2.5 cents a pack, and then reselling them in Maryland.

A pack of Camel Lights costs $3.67 at a Columbia gas station. The same pack is 44 cents cheaper at a convenience store just across the Potomac River in McLean, Va.

"They usually sell them at a discount and make a hell of a profit," said Michael Golden, a spokesman for the comptroller.

The auctions also anger smokers-rights advocates, who say the government should not be confiscating cheaper smokes and then selling them back to manufacturers who might pass along the cost to consumers.

"It soaks the consumer," said Thomas Humber, president of the National Smokers Alliance. "But the real point here is that the rhetoric is always against the tobacco companies. At the end of the day, it's always the consumer who's paying for any increase, regardless of how that increase is implemented."

And industry officials also wouldn't mind seeing the law changed. "Our preference would be to save money and have the state do the work for us," said Brendan McCormick, a spokesman for Philip Morris, which makes Marlboro and other brands. McCormick said his company has destroyed all the cigarettes purchased from Maryland.

Wednesday in Howard County, a divorced couple from Hopewell, Va., pleaded guilty to possessing unstamped cigarettes in Maryland: 17,880 packs, worth more than $40,000.

Comptroller agents received a tip that Cho Tse, 50, and his ex-wife, Lien Tse, 42, were transporting cigarettes from Virginia to Maryland. On Dec. 11, agents watched as the man and woman loaded cartons of cigarettes into black plastic bags and put them in Lien Tse's Ford van. They bought the cigarettes at wholesale clubs, Lien Tse's lawyer said.

The next day, agents tailed the Tses as they drove north to Baltimore on Interstate 95, stopping them a mile south of Route 175. There, agents found a blue blanket concealing the cigarettes. Cho Tse told authorities that he planned to sell the cigarettes in Baltimore's Chinatown.

It was Cho Tse's third conviction for possessing unstamped cigarettes. He was sentenced to five years of probation and ordered to pay a $1,000 fine. Lien Tse received probation before judgment and was ordered to pay a $1,000 fine. State agents confiscated the van and cigarettes.

"They tell people they shouldn't smoke," said Joseph Tauber, Lien Tse's lawyer. "The state of Maryland not only taxes cigarettes, but now they're in the business of selling them."

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