Money laundering offense linked to cigarette smuggling

WINCHESTER – A Stephens City store owner was sentenced to two years supervised probation Thursday on a money laundering charge connected to cigarette smuggling.

The defendant, Frank Weaver Welch Jr., is also facing the loss of his business and home in a related forfeiture action initiated last year in U.S. District Court in Harrisonburg.

But Welch, 65, of 1220 Double Church Road, Stephens City, avoided jail time under terms of a plea agreement reached with Deputy Commonwealth’s Attorney Andrew Robbins.

Welch submitted an Alford guilty plea in Frederick County Circuit Court to one count of money laundering. An Alford plea allows a defendant to continue insisting on his innocence while admitting the prosecution has enough evidence to convict him.

Authorities accused Welch of conducting illegal cigarette transactions out of his store, Veterans Food Mart, at 121 Fairfax Pike.

Robbins was unsure of the total amount of money involved in Welch’s transactions but documents filed online in U.S. District Court cited a review of bank records showing more than $16 million deposited into an account at the Bank of Clarke County between Aug. 1, 2011 and May 31, 2014. The court record states that the account was “connected” to Welch, his wife or Veterans Food Mart.

Robbins said in an interview Friday that the charges and the scale of the case made it an unusual prosecution for his office. Robbins called it the largest case involving cigarette smuggling prosecuted by the Frederick County Commonwealth’s Attorney office.

He said the state’s weak laws against cigarette smuggling made it necessary to find other statutes for prosecuting Welch.

“We felt money laundering was the best charge to meet the facts at the time,” Robbins said, adding that obtaining money by false pretenses was also among the 10 counts filed against Welch.

Several Frederick County residents and business owners have been prosecuted in cigarette trafficking cases involving transactions totaling tens of millions of dollars in recent years, but those charges were filed in U.S. District Court under much tougher federal anti-cigarette smuggling statutes.

All but one money laundering charge was dropped as part of the plea agreement with Welch. Robbins admitted that uncertainty over how a judge and jury would react to the prosecution of a long-time store owner for violating laws governing cigarette sales was a factor in deciding not to forge ahead with the remaining charges.

Robbins said the Frederick County Sheriff’s Office and the Virginia Attorney General were the main agencies conducting the investigation. The agencies assembled the case against Welch using forensic accounting methods and surveillance instead of relying on undercover sting operations that have been prevalent in other crackdowns on cigarette smuggling in the area.

Robbins said authorities launched the investigation when Frederick County deputies noticed a sharp increase in smurfing – the practice of cigarette smugglers going from store to store and buying up cartons of cigarettes to transport to states with much higher cigarette taxes than Virginia’s. The differential allows smugglers to resell the cigarettes in the high tax states at a large profit.

“We started noticing a lot of that,” Robbins said, referring to smurfing, “and Sheriff (Robert) Williamson decided he wanted to get proactive on this.”

Federal court documents list the following items belonging to Welch that have been traced to crimes involving cigarette smuggling and money laundering: A 2012 Ford pickup truck; a 2007 Jeep Wrangler; the Welch residence in Stephens City; Veterans Food Mart; and more than $50,000 in accounts at the Bank of Clarke County and Wells Fargo Bank.

All of the items have been targeted for seizure and disposal by federal authorities.

Robbins said Frederick County’s location as the first stop on southbound Interstate 81 from states such as New York and New Jersey make it prime territory for cigarette smugglers and those who sell to them.

“This was our first attempt at going after a cigarette seller,” Robbins said. “I don’t think it will be the last.”

Contact staff writer Joe Beck at 540-465-5137 ext. 142, or jbeck@nvdaily.com