CIGARETTE RING GOES UP IN SMOKE; LANCASTER MAN IN FEDS' CUSTODY.

Byline: Greg Botonis Staff Writer

LANCASTER - A Lancaster man was in federal custody Friday, suspected of heading a million-dollar ring that trafficked in counterfeit cigarettes, officials said.

Daniel Araya, 42, who owns Araya's Enterprise and Omega Distributors, was among nine people arrested Wednesday and Thursday in a crackdown on what investigators said was the one of the largest trafficking ring ever uncovered in California's Inland Empire.

Investigators said the ring cost California, the federal government and the tobacco industry more than $1 million in lost tax revenue.

``He was pretty much one of the leaders of the circle,'' said Cecilia Leon, a spokeswoman with the federal Bureau of Alcohol, Tobacco, Firearms and Explosives. ``This was a pretty large ring and a very intense investigation.''

The arrests were the result of a three-year investigation conducted by the ATF and U.S. Immigration and Customs Enforcement, who used undercover investigators to observe the trafficking and sales of the counterfeit cigarettes.

Investigators said Araya and Sivly Hang, 54, of Moreno Valley bought cigarettes from China that resembled American brands and affixed counterfeit California tax stamps onto nearly 4 million packs. They then distributed those cigarettes to shops throughout Southern California, including Apple Valley, Victorville, Rancho Cucamonga, Hesperia, Santa Paula and Anaheim.

Some of the owners of those shops were aware of the fraudulent tax stamps and counterfeit cigarettes, investigators said.

ATF officials said that, under California law, only cigarette distributors licensed by the California Board of Equalization are authorized to receive and possess cigarettes without California tax stamps. Distributors have to purchase those stamps at a cost of 87 cents per pack and affix them to the pack prior to distribution.

During a search of Araya's home and businesses, officials recovered more than $250,000 in cash, 5,000 cartons of counterfeit cigarettes and 3,800 fraudulent tax stamps.

``Trafficking in counterfeit cigarettes is a multibillion-dollar international enterprise that robs financially strapped states like California of badly needed revenues,'' said Gary Pinkava, assistant special agent in charge for ICE investigations in Riverside and San Bernardino counties.

Each of the nine men arrested faces up to five years in prison and a $250,000 fine, officials said.

The California Board of Equalization, the Los Angeles County Sheriff's Department, the Internal Revenue Service and the FBI participated in the investigation.

Greg Botonis, [phone]

greg.botonis(at)dailynews.com