David Freel sits outside his home on his second day under house arrest.

(BEN BULMER / iNFOnews.ca)

Shortly after David Freel got stopped by the RCMP with one-and-a-half million illegal cigarettes in his truck and trailer, he got a letter from the government saying he owed them $11,672,000.

"When I didn't pay that, they added a 10% fee of $1,167,000," Freel told iNFOnews.ca.

With another $900,000 in Provincial Sales Tax, plus all the interest, he now owes the government almost $17-million.

He laughs when asked whether he's going to have a stab at paying it back.

"How?" he says. "I don't shit golden eggs."

On a warm July morning, Freel sits outside his Salmon River Road property and talks frankly about selling illegal cigarettes.

"It's a market that's bigger than what people realize," he says.

He's on his second day of house arrest, having been convicted on July 2 after pleading guilty to one charge of possessing tobacco for an unlawful purpose.

The cigarettes seized from Freel by the RCMP

Image Credit: Vernon North Okanagan RCMP

The 48-year-old's brush with the law started in January 2023 when he was pulled over in Vernon, his truck and trailer filled to the brim with illegal smokes.

However, Freel says while he stopped selling illegal cigarettes after getting arrested, he'd been doing it for about 10 years.

When he started, he'd get a Ziploc bag with 200 loose cigarettes.

"I refer to them as ghetto bags," he jokes.

While Freel says he originally just bought them for his own personal use after a year or so, he began reselling them.

And the market for tax-free cigarettes grew rapidly.

"Ghetto bags" were replaced with cigarettes in packets, and over the years, the quality of the packaging got better. To the untrained eye, the packs look identical to regular smokes bought in convenience stores. One thing that is missing is the stamp that says "Duty Paid."

Freel says the tobacco comes from the US and is taken to Indigenous reserves and turned into cigarettes. He has no idea whether the raw tobacco crosses the border legally or not.

He says all the cigarettes he bought come from "out east," and he sold them to stores on reserves and to individuals. It's all tax-free.

Over the years, the market for tax-free cigarettes has grown exponentially, and it's not hard to see why. While a regular pack of cigarettes hovers at about $20, unstamped tax-free smokes go for $5 a pack. The 75% saving is not to be sniffed at.

A pack-a-day smoker would spend $600 a month on regular cigarettes. Purchased from Freel, it would cost $150.

The 1.5 million cigarettes seized from David Freel.

(BEN BULMER / iNFOnews.ca)

The price difference has fuelled a sudden boom in "smoke shops" that have popped up on reserve lands across the province.

"Between here and Kelowna, I bet you can find 50 stores that sell these cigarettes," he says.

They’re also easy to buy online.

As "grey-market" cannabis stores appeared on reserves after marijuana legalization, the "smoke shop" is often now sitting next door.

Indigenous Canadians with an Indian Status Card can buy tax-exempt tobacco from regular stores, Freel says illegal smokes are cheaper still.

And the boom in illegal tax-free cigarettes is costing the government.

A 2023 study from financial research firm Ernst and Young found that between 2019 and 2022, the B.C. government lost between $215 million and $591 million in tax revenue.

To the untrained eye, the packets look the same.

(BEN BULMER / iNFOnews.ca)

It's also costing retailers.

Advocacy group Retailers 4 Safe Communities says illegal tobacco sales are devastating convenience stores and small business owners as they lose out on millions in revenue.

The group accuses the BC government of inaction and point to Alberta, which set up a working group on contraband tobacco, and Ontario and Saskatchewan who have taken tougher enforcement measures.

"Here in British Columbia we wait. For what? It’s not clear," Retailers 4 Safe Communities say.

The advocacy group also points to the prevalence of organized crime in the illegal tobacco industry.

The Ernst and Young report estimated that organized crime in B.C. made between $265 million and $727 million in gross revenue from illegal tobacco sales between 2019 and 2022.

"There is organized crime involved, like anything else, but I'm not organized. I'm not with anybody," Freel said. "I was doing it myself to help little old ladies... I couldn't stand seeing... old people eating cat food because they're addicted to a product and they're on a fixed income and they can't afford to eat because they're buying their cigarettes at $20 a pack," he said.

Freel said he had no intention of becoming so big, but over the years, he stopped doing regular work and just sold illegal tobacco.

He says he has no idea how much money he was making, but said, "I did OK."

The shipment seized by police contained roughly one and a half million individual cigarettes and cost Freel about $160,000. He said he'd make between $30,000 to $50,000 selling them.

And he'd sell them quickly, within a couple of weeks.

"I'd have more on the way before they'd all be gone," he said. "If I don't have them somebody else is gonna."

David Freel is jovial as he talks openly about the illegal cigarette market.

(BEN BULMER / iNFOnews.ca)

Shortly after being arrested, he was diagnosed with squamous cell carcinoma. He had it cut out, but the cancer has returned.

"The seller of cancer gets cancer," he says. "I know what I was doing was wrong. I didn't see it as wrong at the time, trying to help people out. We all make mistakes."

And appears mistakes made by the RCMP could have got Freel off the hook.

In court, the Crown said there were "Charter Issues," and several charges were stayed. A plea deal between lawyers was agreed and Freel accepted one month of house arrest, followed by nine months' probation.

He claims the Crown lied in court about him being pulled over for a broken tail light. He says the RCMP told him at the time his trailer was stolen.

Freel says neither was true, and it appears he could have fought an illegal stop and seizure. It's often enough to have evidence tossed and sees people walk free.

However, he says his lawyer was $5,000 a day and it was slated for a four-day trial. He couldn't afford the $20,000.

He knows he got off lightly and said he was worried he'd go to jail.

He also disputes the evidence the Crown put forward saying he had 77 million grams of tobacco. And the math isn't correct.

Freel had more than 1,500,000 cigarettes on him and each contained roughly one gram. That makes 1.5-million grams, not 77 miilion.

The Canadian government fined him at 0.32.5 cents per gram.

"They figured I was selling a million grams of tobacco a month," Freel said. "They assumed I had a business. They told me I had a business. I've never had a business."

The government calculated it at $325,000 a month for 36 months.

On top of the $4,600 in cash Freel lost during the seizure, the government froze his bank accounts and took about $4,500.

It's a long way from the $17 million he owes them.

Freel is jovial while he talks candidly about his time selling illegal tobacco.

"It was two and a half years ago. I guess water under the bridge," he says.

As he sits and chats, he smokes a few cigarettes – all illegal ones.

It's hard to blame people addicted to a pricey product for buying from the black market, and with about nine per cent of British Columbians smoking that's more than half a million smokers likely looking for a good deal.

And would Freel do it again?

"Absolutely," he replies.

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