The state Department of Taxation and Finance lacked adequate controls over sting operations, in one case resulting in the loss of and failure to account for about $160,000 in cash proceeds in an operation in Westchester County, according to a new report from New York Inspector General Catherine Leahy Scott. She found that the agency’s Petroleum, Alcohol and Tobacco Bureau did not have sufficient oversight of sting operations and lacked an effective accounting system.
The Department of Taxation and Finance has since strengthened its financial control over operations, Scott said.
“In its effort to undermine the black market sale of cigarettes, PATB’s flawed sting operations lacked textbook safeguards to ensure the legitimacy, integrity, and effectiveness of the stings,” Scott said in a statement. “Enforcement operations of this nature require not only a full accounting of every dollar that changes hands during the stings but also internal controls and rigorous investigative protocols. That did not happen at PATB, undermining the credibility of the investigations.”
In September 2010, the then-deputy inspector general for the Department of Taxation and Finance reported to the state Inspector General’s Office that there were questionable operations in the bureau, and someone who requested anonymity alleged a number of improprieties. They both claimed that the director of the bureau, then Thomas Stanton, had been running a multi-million dollar cigarette sting operation without using basic investigative protocols.
In both cases, they alleged flaws in Operation Keystone, a cigarette interdiction operation that ran from late 2008 to the fall of 2009. It began and ended in Westchester County, although it was based primarily in Pennsylvania, Scott said. In addition to the missing $160,000, the IG found that informants had been paid hundreds of thousands of dollars were not accounted for by the Department of Taxation and Finance. The bureau failed to track inventory and evidence, and there were instances in which investigators brought their own semi-automatic rifles (which they weren’t trained or qualified to use in a New Operation) to out-of-state cigarette transactions and sting operations.
“PATB’s neglect of basic investigative protocols eventually led to dismissed prosecutions and the halting of sting operations in the summer of 2010,” the report said.
A senior investigator in the bureau and his wife, also a bureau employee, made deposits totaling about $25,000 into the private bank account, most of which were within two weeks of cigarette sale transactions in which cash was found to be missing.
Scott’s office referred the matter to the Westchester County District Attorney’s Office, which declined to prosecute. The senior investigator resigned from the bureau.
As a result of the investigation, managers implicated in it either left the agency voluntarily or were fired. Stanton was fired in 2010. The Department of Taxation and Finance is pursuing disciplinary action against current staff implicated in the probe. The agency ceased all covert sting operations and closed associated bank accounts, Scott said.