It wasn’t the white knight the city was looking for and it wasn’t a reporter who unearthed a disturbing trend. Instead, it was a tax accountant striding through the canyons of lower Manhattan with a sheaf of papers.
Sixtyish Giacomo Birelli was a serious man who sported a white goatee and had worked downtown in New York’s Excise Tax and Revenue Division for over thirty years. Though never promoted to higher office, he maintained a zeal for bean counting.
He arrived precisely at ten am at the District Attorney’s office third floor office in City Hall and noted the D.A.’s upscale furnishings as he was shown to Assistant D.A. Ronald Trubow’s office.
“Hello Jack, grab a chair. Susie can you get us a couple of coffees?”
“Hello Mr. Turbow. Make mine black please. By the way the name’s Giacomo.”
“Er, sorry Giacomo.”
“No problem, most make the same assumption.”
Turbow settled in his chair, “You mentioned it was important, so what’d you have?”
“Well you see Mr. Turbow, I’ve been handling the excise taxes for the last decade and though the total amount we collect has risen slightly, I drilled down a bit.”
“Uh huh, go on.”
“Well, it’s not surprising the collection of cigarette taxes, which include cigars and loose tobacco, have come down. On the surface people are smoking a bit less, but when you factor in the dramatic rise in the rate of tax per pack, it doesn’t add up. You know we raised it by over three dollars a pack and should be collecting significantly more.”
Giacomo unfolded a large spreadsheet, “I’ve highlighted the quarterly receipts and the corresponding tax rates. Then I’ve normalized the tax rate factoring the decline in smoking. I’ve used the national numbers for that and …”
“Hold up Giacomo, you’re losing me. I’m not a numbers guy and I appreciate the work you’ve obviously put into this. But in layman’s terms can you tell what you found?”
The accountant stroked his goatee, “Well, to summarize it, and I have the data to back it up; tobacco tax money’s going uncollected.”
Turbow wanted a summary but this was a bit thin, “Can you give me a little more than that?”
“We know that cigarette consumption is down, let’s estimate it at five percent over the last couple of years, Okay?”
“Sure, that seems fair.”
“Good, so if all things equal, in other words the tax rate per pack didn’t change, we should realize a collection rate five percent lower. Understand?”
“Of course.”
“Well, the problem or issue is that we have tripled the tax rate and are still collected below norm.”
The coffee came in as Turbow asked,
“How much we talking about here?”
Giacomo took a sip, “It a tough number to nail down exactly.”
“An estimate, give me an estimate.”
Giacomo tilted his head and thumbed his goatee, “Well anywhere from two to four hundred million.”
Turbow leaned forward, “Are you shitting me? That’ll plug the city’ budget hole…”
Giacomo put his hand up, “Hold your horses, Mr. Turbow, the estimate includes both State and City losses…”
“What’s the break down?”
“The State tax rate is approximately seventy five percent, so figure a hundred fifty to three hundred million for the State and fifty to a hundred million in losses for the City.”
“This could be big, how certain do you feel about the likelihood these losses are real?”
“Mr. Turbow I take my responsibilities seriously. I don’t make assertions without the facts to support them.”
“I, I didn’t mean to imply otherwise but this could be a hot issue and we’ve got to be certain before we begin throwing manpower at it.”
“Rest assured, I have tripled checked the statistics and even verified collection rates for other states. States that have raised rates as we have, with similar demographics, like California and Illinois.”
“Wow, this is good, real good. Listen, I’ve got a meeting in ten with the DA but you can be sure I will be in touch.”
“Morning Ron.”
“Morning Boss, listen something’s come up and it could be big. Mind if I jump right into it?”
As Turbow told Goldman about his meeting with Giacomo, the District Attorney calculated the impact on New York’s fiscal situation and his career aspirations. He salivated at the chance to shine in a situation that affected both the State and City. It was a rare opportunity but he reminded himself to be cautious.
He steepled his fingers, “Uhm, it’s both disturbing and hopeful.”
Turbow was at the edge of his seat, “It could be huge boss, let’s pounce on it; we could take some investigators off the Board of Ed case.”
Goldbaum wanted to pursue it will all his guns but said, “We need to go slow here. Ask Marty to meet with this fellow Giacomo and vet the data. Then we’ll go from there. Now, the Gluken hearing is coming up and I’d like you to head it up. It’s a big case and it’ll help advance your career.”
After his meeting with Turbow, the D.A. asked his secretary to clear his schedule till noon and worked the phones. He called a former District of Attorney of Arizona who had experience in the battle to prevent the Indian reservations in Nevada from running tax free smokes into Arizona. Goldbaum also reached out to his contacts in the Florida capitol of Tallahassee. Florida had a smallish tax on cigarettes but a long border with Georgia, who had the lowest tax on tobacco in the country. The difference of ten dollars a carton provided many smugglers with an income. The DA then had a discussion with an old classmate who now headed the Federal Governments Alcohol, Tobacco and Firearms interdiction efforts.
The morning was evaporating and he made two last calls, one that cancelled a lunch date with his wife, replacing her with a trusted associate for a sandwich in his office. He then met with his chief of staff, Gordon Black, who also headed the DA’s exploratory committee for Mayor. When Black heard the news about the tobacco tax he knew it could vault both of them into the mayor’s office and pushed Goldbaum to drop other investigations and pursue it immediately. Well aware of the political implications, the DA advised he was quietly going to collect some intelligence first and left for his informal lunch date.
“Hi come on in, how you doing Raymond?”
“Good Chief. Hey, thanks for inviting me up to such hallowed ground!” He shook the DA’s hand.
“Let’s sit over there; Sandy’s organized a nice little lunch for us.”
Raymond Perrilli, a veteran of two wars and countless skirmishes with organized crime, sported a crew cut and was in Navy Seal shape.
“Nice going putting that bastard Brock on ice. How long you think he’s gonna get?”
“Well, the sentencing hearing is a couple of weeks away and the defense is working overtime for leniency. But the magnitude of the fraud virtually mandates twenty years and I think the judge is going to be sympathetic to our case.”
“He should rot in the can.”
“Help yourself to a sandwich Raymond.”
“So what’s cooking? I know you didn’t invite me in for the chow.” He grabbed a handful of fries.
“You know I value your loyalty and discretion Raymond, something’s come to our attention but it’s early and we need to be dead certain before we use any of this office’s resources, understand?”
“Since the old neighborhood days, I’ve been invisible, that’s why they call me Casper.”
Goldbaum leaned across the table, “If what I suspect is true, we’ll need the element of surprise, we can’t tip our hand. Otherwise we’ll be left prosecuting a bunch of low level thugs.”
Ray put down his sandwich, “I get it, what’s the mission?”
“I want you to nose around, discreetly, with your organized crime contacts. Seems a lot more smuggling of cigarettes is going on than we thought. New York is being deprived of a mountain of money and you know the shape of our finances.”
“There’s a lot of players in that arena, a couple of mob families, the Chinks, a few Ruskies, and now even the Indians are moving smokes.” He said between bites.
“Yes but we suspect one organization is responsible; the sources and distribution required for this level of volume support the thesis, but I’m, we’re not discounting a coordinated effort or a loose affiliation of some sort.”
While eating a half of sandwich, Goldbaum shared most of the background he had learned with Ray and said he had to leave for another meeting.
Ray nodded, picked up the last quarter of his turkey club and said as the DA got up, “Leave it with me. I’ll fish out a trail for you, don’t you worry.”