Scandal Overseas: Sex, Lies and Cigarette Smuggling

Sex, lies, the Italian mafia, millions of packs of Marlboro cigarettes, and billion-dollar profits are all rolled into the plot of one of Europe's largest smuggling operations in recent years, where trials in both Italy and Switzerland are under way.

At the center of it all: the head of state for one of Europe's smallest but most beautiful countries, the coastal nation of Montenegro, the backdrop to the 2006 James Bond film, "Casino Royale."

Based on hundreds of pages of wiretap transcripts, law enforcement reports, and indictments, the scandal sounds like a screenplay. Between 1994 and 2002 tobacco smuggling became a state enterprise of Montenegro, allegedly controlled by Prime Minister Milo Djukanovic and an inner circle of Montenegrin officials, according to newly released Italian court records obtained by the International Consortium of Investigative Journalists (ICIJ), a project of the Center for Public Integrity in Washington, D.C.

Almost every night dozens of pilots steered a fleet of large speedboats crammed with cigarettes- most of them Marlboro and Marlboro Light -across the Adriatic from the Montenegrin port of Bar to the Italian coast. Once in Italy, the untaxed cigarettes were sold by the mafia on the black market, according to Leo Sisti, the author of the ICIJ report.

Two of Italy's mafia syndicates managed distribution of the cigarettes and laundered more than $1 billion in profits in Switzerland, court documents show.

Italian prosecutors have accused Prime Minister Djukanovic of "having promoted, run, set up, and participated in a mafia-type association."

Djukanovic was dropped from the indictment in March of this year thanks to diplomatic immunity. He has denied all of the allegations in Italy.

Nevertheless, his critics say he was directly involved, and his family's vast fortune likely was boosted by the illicit trade.

"He is a criminal, no doubt about it," said Ratko M. Knezevic, a former Montenegro government insider who now lives in London. Knezevic had at one time lobbied Washington on behalf of Djukanovic, but he says he and the Prime Minister had a falling out and no longer communicate.

Illicit Cigarette Trade

Knezevic said that about half of the income on the illicit cigarette trade went to the hands of major players in Montenegro, all close associates of Djukanovic. "It is hard to imagine that some of that enormous profit and cash has not finished in his hands or hands of his family, too. Today his family and a few associates control every piece of economic activity in the country," he said.

A court in Bari, Italy, began a preliminary hearing on Wednesday to decide whether the evidence gathered by prosecutors is enough to put 14 people charged in the Montenegro case on trial. The next hearing date has been postponed until November. A second, related trial of nine people has been underway since April in Bellinzona, Switzerland, where a ruling is possible on June 19, according to ICIJ. The case focuses on how Italian mafia gangs laundered money from the Montenegro smuggling through Swiss banks and money brokers.

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