Philip Morris’ Mafia connections

The killing of two Guardia di Finanza agents in Brindisi, Italy, reflects the powerful underworld interests involved in tobacco smuggling into Italy.

On the night of February 23, 2000, as a full moon drifted in and out of scattered clouds, revenue agents with Italy's Guardia di Finanza drove along a highway near the Adriatic port of Brindisi. They were hunting tobacco smugglers. Suddenly, out of the darkness, a Range Rover with reinforced front bumpers and its headlights off swung across the highway and deliberately crashed into the agents' tiny Fiat Punto. Alberto De Falco, 33, and Antonio Sottile, 29, were killed. Two others sitting in the back seat were seriously injured. Driving in the Range Rover, which was crammed full of contraband Marlboro and Merit cigarettes, were Giuseppe Contestabile and Adolfo Bungaro, two soldiers of local crime boss Bruno Rillo. Rillo, who was not in the Range Rover, was arrested and convicted of smuggling. Contestabile and Bungaro were convicted of smuggling and still face murder charges.

The killing of the two agents in Brindisi reflects the powerful underworld interests involved in tobacco smuggling into Italy. Like many other countries in the European Union, Italy's tobacco taxes are high. The country also has a state monopoly over manufacture and distribution, which keeps prices high and, therefore, makes smuggling that much more lucrative. Italian authorities have compiled several recent intelligence reports gleaned from investigations and court trials dating to the early 1980s. According to one of these reports obtained by the Center, tobacco smuggling was transformed in the early 1980s from a cottage industry into "an incredible commerce of thousands of cases" worth "hundreds of millions" of lira per shipload, transacted through Swiss bank accounts.

The July 16, 1999, report by an Italian parliamentary commission investigating the Mafia and other criminal organizations said smuggling international-brand cigarettes was "one of the most important sources of illicit gain" for organized crime and one that was facilitated by international links with tobacco manufacturers, especially Philip Morris. Beginning in the early 1980s, Philip Morris and RJR, from offices in Basel, Switzerland, ran a cigarette export operation through three Swiss companies that had close ties to Italian organized crime, the 53-page report said. These licensed distributors were identified as Balmex AG, owned by Patrick Laurent; Basilio AG, owned by George Kastl; and Algrado AG, owned by Werner Denz. "This circuit . . . constituted the supply channel for the tobacco smugglers," the report said. A senior Italian magistrate said the report incorrectly named Patrick Laurent when it should have named Patrick Monnier of Vaud, Switzerland, who is wanted along with several other key figures on charges of cigarette smuggling and membership in a mafia-like organization.

Two channels were established to smuggle into Italy, according to the report. Cigarettes manufactured under license in Switzerland were shipped directly to Albania. Cigarettes manufactured in the United States were shipped to warehouses in Antwerp, Belgium, and then to Albania. From Albania, the cigarettes were smuggled into Italy or the Middle East. "The contraband moved . . . across predetermined commercial channels," the report said. These channels were also used for drug trafficking and money laundering under the supervision of Kastl and Denz, who, the report said, had smuggling backgrounds and "notable criminal stature in these two specific fields."

Kastl and Denz were also identified in the report as having direct connections to the Sicilian Mafia in Palermo. In 1984, a Florence court sentenced Kastl to 26 years in prison for trafficking 82 kilograms of heroin. Other Italian intelligence reports obtained by the Center show that in the 1990s the main route for tobacco smuggling into Europe was changed to go through Montenegro's Adriatic ports and then by speedboat to Italy, where the Puglia coast from Gargano to Brindisi is ground zero in the tobacco battles. In fact, by the early 1990s Brindisi had become criminalized by cigarette smuggling, according to Italian authorities. Italian police and revenue officials charge that the Mafia runs the smuggling and that Montenegrin government officials, who receive millions of dollars in kickbacks, sanction it. Once again, the main suppliers, Italian police and government officials say, are Philip Morris and R.J. Reynolds distributors.

A 240-page internal report on international cigarette smuggling compiled in 1997 by Italy's tax and customs police, the Guardia di Finanza, describes the smuggling hierarchy as it existed during the 1990s. The report, obtained by the Center for Public Integrity, states that smuggling into Europe is divided among various crime families connected to the Sicilian, Camorra, and Sacra Corona Unita organized crime syndicates. They operate the smuggling through a "pyramid" of 19 people living in Italy, France, Switzerland, and Greece. These traders hide their activities behind numerous front companies located in tax havens such as Switzerland, Liechtenstein, Panama, British Virgin Islands, Gibraltar, Cyprus, Belize, Netherlands Antilles, and the Channel Islands. The report claimed that tobacco smuggling in Europe caused an estimated $700 million annually in losses to governments and legitimate merchants.

Again, throughout the 1990s, Mafia bosses struggled for control of this lucrative business. According to Italian court records, Neapolitan Camorra boss, Ciro Mazzarella, nicknamed "the prince," "the engineer," or "the uncle," attempted in 1993 to monopolize smuggling and duty free businesses in Montenegro. He conspired to gain control of Montenegrin government warehouses, which he would hold through a Panamanian company called Gisto, based in Lugano, Switzerland. At least 50 containers a month, primarily Marlboros, would be sent to warehouses in Montenegrin ports of Zelenika, Bar, and Katar. The cigarette cases would then be transferred to speed boats and shipped at night across the Adriatic to Italy's Puglia region, about 100 miles away.

According to documents obtained by the Center, Mazzarella, seeking support for his venture, contacted individuals close to Milo Djukanovic, Montenegro's then-prime minister and current president. This was quickly granted and Mazzarella received a license from the government-owned company ZetaTrans to be the exclusive cigarette trader through Montenegro. But Italian investigators uncovered the conspiracy and, on September 27, 1993, Mazzarella was arrested in Lugano. The case is still before the courts.

Meanwhile, billions of contraband cigarettes are still run out of Montenegro, Italian police say. Last December, Italian police arrested Francesco Prudentino, 52, while he was Christmas shopping in Greece. Prudentino, who operated out of Montenegro, is named in a 1999 report by Italian investigators as a key mob-connected international tobacco smuggler and was on Italy's list of the 30 most-wanted fugitives. Prudentino was charged with smuggling, being a member of a mafia-like organization, and murder. He was extradited to Italy in February. Italian Finance Minister Ottaviano Del Turco has said publicly that he expects Prudentino to be a key figure in Italy's cigarette smuggling investigation and might provide information about possible links to the multinational tobacco companies.

The 'Fiduciario'

A principal player in the smuggling through Montenegro is Gerardo Cuomo, a Neapolitan with Mafia connections. The 1999 parliamentary report refers briefly to a March 21, 1985, meeting in Puglia between Cuomo and Filippo Messina, who was identified as a Mafia member, tobacco smuggler, and heroin dealer. Other Italian investigative reports have identified Cuomo as one of the top players in Italy's Mafia-run cigarette smuggling operation. Cuomo was arrested on May 10, 2000, in Zurich on an Italian warrant for cigarette smuggling out of Montenegro and for being a member of a mafia-like organization. The investigation implicates more than 80 people, including Italian Mafiosi and Swiss bankers. Cuomo, 54, is in a Swiss jail, fighting extradition. Court records show that for years, Cuomo has acted as a business representative for the Italian mob. A senior Italian investigator, citing an internal federal police memo from the 1980s, said Cuomo was linked to Mafia boss Giuseppe "Pino" Savoca, who was connected through his Palermo-based family to Tot Riina, the "boss of bosses" of the powerful Corleone Mafia family. Riina is serving a life sentence for the murder of the anti-mafia judges Giovanni Falcone and Paolo Borsellino.

Cuomo has a long history of tobacco smuggling. In the 1980s, he was sentenced to a total of nine years for cigarette smuggling and drug trafficking. His co-defendant was Pietro Vernengo, a loyal Riina lieutenant. A 146-page classified report, prepared in 2000 for the Guardia di Finanza by the head of its organized crime unit, identified Cuomo as "fiduciario," or trustee, of Philip Morris. The report, which examined the key figures in Italy's cigarette smuggling operation, did not elaborate on that relationship. The current warrant for Cuomo's arrest, signed by Judge Daniela Rinaldi on October 21, 1999, claims that Cuomo is the "owner" of one of four tobacco licenses issued by Montenegro and that he smuggled cigarettes from Montenegro to Italy through a criminal organization. However, Cuomo told Italian prosecutor Giuseppe Scelsi on July 26, 2000, that only one company — a Panama-registered company called Santa Monica owned by Franco della Torre — was licensed by Montenegrin authorities to trade cigarettes. Cuomo said he, in turn, was one of four subcontractors to Santa Monica and that he had to pay della Torre's company $55 to $70 a case [10,000 cigarettes] as a sort of licensing fee, and was required to purchase at least 25,000 cases a month.

Della Torre of Lugano, Switzerland, is well known to Swiss and Italian police. He was a defendant in the "Pizza Connection" trials in the 1980s involving Mafia heroin traffickers and was sentenced by a Swiss court to 18 months in jail for drug trafficking. In late February, Scelsi filed charges against della Torre, alleging he was a smuggler and a member of a mafia-like organization. Transcripts of Italian police wiretaps, obtained by the Center, reveal that Cuomo also has close Montenegro political ties. In 1996, Italy's Anti-mafia Investigative Agency taped a telephone conversation between Cuomo and Santo Vantaggiato, a fugitive from Italian law hiding in Montenegro. The two men were discussing the election in Montenegro, and Cuomo boasted that he was close to senior Montenegrin politicians. He mentioned that if his "friends" got in, he would be "much stronger." Vantaggiato was murdered in Montenegro two years later in a mafia war.

A series of wiretaps by the same agency also reveals close connections between Cuomo and former RJR sales executive Franco Gabriele. Gabriele, 51, left RJR in 1993 and started a company called Italian Tobacco USA Inc. in Winston-Salem, North Carolina (The same Gabriele who has an immunity deal with U.S. authorities in exchange for testimony about RJR and smuggling into Canada.) In the conversation between Cuomo and Gabriele, according to a transcript obtained by the Center, the two men discussed the coming privatization of the government-owned Italian Tobacco Monopoly and the possibility that it could be purchased by Philip Morris. Cuomo wanted to position himself so that his people could buy a stake in the company and become distributors. He asked Gabriele if he was "well connected" and could give him "some suggestions." "I'm already giving you inside details," Gabriele replied. "Use them with discretion. I don't want them to come up."

Another taped conversation in 1996 revealed Gabriele trying to sell containers of Marlboros to Cuomo for shipment out of either Aruba or Canada to warehouses in Cyprus or Antwerp, even though Philip Morris already manufacturers Marlboros in Europe, and Italy's Tobacco Monopoly manufactures them under license for sale in Italy. In a third conversation, Gabriele talked to Cuomo and his nephew Sandro Cuomo about shipping RJR's Winstons to Spain from Aruba. "We have to deal with the Winston cigarettes of Reynolds," Gabriele says. "We send them to somebody who brings them to the Spanish peninsula. We have done it many times; nothing has ever been found."

Gabriele has since given grand jury testimony on cigarette smuggling cases in the United States. His lawyer Ed Gerber said he has arranged immunity from prosecution for Gabriele with U.S. authorities in return for Gabriele's cooperation in tobacco smuggling investigations. Philip Morris denies the allegations. "We do not condone, assist, or promote contraband," David R. Davies, vice president for corporate affairs for Philip Morris Europe, said. He said Philip Morris, the world's leading cigarette company, would work with the EU and European governments to help fight smuggling. Del Turco, Italy's finance minister, said that help was virtually "nonexistent."

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