In California alone, an estimated $182 million a year is lost in unpaid excise taxes on cigarettes.

The trade is fueled by wide gaps among the states in cigarette taxes.

Black marketers buy cigarettes in bulk, in states such as Virginia or North Carolina, where the taxes are low, and then haul the contraband to high-tax states such as New York. Police say a carton costing less than $40 in Virgina can sell for more than $100 in New York City.

Edgar Domenech, who heads the Washington, D.C., field office of the Bureau of Alcohol, Tobacco, Firearms and Explosives, told NPR that organized crime groups with ties to Vietnam, Russia, Korea and China are involved in the business.

In an investigation in northern Virginia, a particularly frightening twist emerged: undercover investigators in two instances were asked by their criminal contacts to murder their competitors.

According to Capt. Dennis Wilson of the Fairfax County Police Department, the two murders were eventually faked. The investigation wound up leading last November to the arrest of 14 suspects tied to the contraband cigarette trade.

GUILDFORD, England — This handsome town south of London is steeped in history. An 11th-century castle built by William the Conqueror overlooks the village center from a lovely hilltop park. The Rev. Charles Lutwidge Dodgson, better known as Lewis Carroll, is buried here.

On the outskirts is a no-frills two-story building packed with history of another sort. Known as the Guildford depository, it is a house of secrets, or former secrets, of the world’s second-largest tobacco company, British American Tobacco.

British American created the archive to hold millions of pages of documents produced for the anti- tobacco suit filed by the state of Minnesota in 1994. Most of the records involve health and marketing issues that were the crux of the lawsuit.

But embedded in the mountains of paper are fistfuls of memos on British American’s links to cigarette smuggling — documents that weren’t pertinent to the lawsuit and that the company never was asked to produce. It turned them over anyway, for reasons that remain a mystery.

Les Thompson was a self-made man. He grew up poor in a small town in Ontario and got no further than high school. Still, he fashioned a nice career in the cigarette business, rising through the ranks at the Canadian arm of R.J. Reynolds.

In the early 1990s, he took on a big and risky assignment: helping the company gain a foothold in Canada’s exploding market for contraband cigarettes. As a regional field manager for RJR-MacDonald Inc., he supplied cigarettes to U.S. distributors, who had them smuggled back into Canada across the St. Lawrence River to avoid Canadian taxes.

With Thompson’s help, the company amassed more than $600 million in revenue and more than $100 million in profit from contraband sales, Canadian authorities have alleged.

Thompson’s superiors rewarded him with a promotion and lavish praise. Then, some of the distributors were arrested. And they began pointing fingers at him.

Federal Judge Lewis A. Kaplan was part of the 2-1 majority that gave the tobacco industry one of its biggest legal victories in recent years–a ruling upholding dismissal of Canada’s cigarette smuggling case against R.J. Reynolds Tobacco Holdings Inc. The ruling last October by the U.S. 2nd Circuit Court of Appeals not only derailed Canada’s billion-dollar claim but also led to dismissal of similar suits against cigarette makers by the European Union and Colombia.

Internal documents disclosed in tobacco litigation show that Kaplan had represented Brown & Williamson Tobacco Corp. as a private attorney during the 1970s and ’80s.

The documents show that as part of Kaplan’s work for Brown & Williamson, he participated in meetings of the Committee of Counsel, the inner sanctum of top tobacco lawyers that mapped the companies’ joint legal and political strategies–including how to temper government action on tobacco smuggling.

Kaplan did not disclose his former ties with the industry to lawyers for the government of Canada, though legal experts say he didn’t have to. Nonetheless, tobacco industry foes, who said the ruling was of immeasurable benefit to the entire industry, not just R.J. Reynolds, reacted with surprise and anger.

Philip Morris and British-American Tobacco, the world’s two biggest tobacco companies, secretly joined forces to fix cigarette prices and divide markets in Argentina, Venezuela and other Latin American countries, according to internal documents that explicitly describe the deals and the involvement of some of the firms’ most senior executives.

In Argentina, the companies’ subsidiaries set prices and allocated market shares, relying on “verbal agreements” because “there can be nothing in writing in Argentina on the subject,” said a 1989 memo by a BATCo director.

In Costa Rica, their accord even dictated the amount of TV advertising each firm could buy and what incentives they could offer retailers to promote their brands, according to a February 1992 letter from the head of BATCo’s Costa Rican subsidiary.

Another price-fixing agreement covered Venezuela, but when a price war broke out between the firms’ Venezuelan affiliates, each began smuggling cigarettes into the country through Aruba and Colombia to avoid paying taxes, a 1992 BATCo memo said.