HAMPTON — For more than a year and a half, Hampton police officers ran an undercover cigarette business.

Tens of thousands of dollars at a time would change hands inside a nondescript industrial warehouse off Aberdeen Road, as the department's "Blue Water Tobacco" company sold discounted cigarettes by the case.

Though the operation was a sting staged to crack down on the lucrative black market in tobacco, Hampton police officers did not make a single arrest or file any criminal charges over the course of the 19-month investigation.

Millions of dollars, however, flowed through Blue Water Tobacco's account, according to documents obtained by the Daily Press under open records requests. Some of that money was spent on new SUVs, electronics, and travel costs for "conference and training" trips to New York, Washington, D.C., and Las Vegas.

For the past seven months, three of the police officers involved with the undercover operation have been under scrutiny. Those officers, including a major who is one of the police department's highest-ranking officers, were put on administrative leave with pay on Feb. 23 following allegations of misconduct.

In an Aug. 1 email obtained by the Daily Press, City Attorney Cynthia Hudson told the City Council that Police Chief Charles R. Jordan Jr., in consultation with City Manager Mary Bunting, "terminated the undercover operation immediately upon learning of alleged misuse of funds and personal property by some of the assigned employees."

The documents the city provided to the Daily Press do not indicate who made or approved the financial transactions from Blue Water Tobacco's checking account.

Bunting wrote in an email that such approvals came at "varying levels of the (Police) Division," with Jordan saying he approved some of the major expenditures and other officers signed off on other transactions.

In an interview last week, Jordan said the misconduct complaint came in at 4:30 p.m. on Friday, Jan. 27, from a trusted officer within the operation. "It was all shut down," Jordan said of the operation.

On Feb. 9, Jordan requested that the Virginia State Police open a criminal investigation into the allegations.

"This was the first time in Hampton Police Division's history that an outside agency was utilized to conduct a criminal investigation, but it was done given that some of the officers involved were of high rank," Bunting wrote in an email. "It was our goal to ensure that there would be no doubt as to the completeness or thoroughness of review."

Months later, two State Police financial investigators turned their file over to the Hampton Commonwealth's Attorney's Office for further review.

In mid-June, Acting Hampton Commonwealth's Attorney John F. Haugh determined no criminal charges were warranted in the case. "There was no evidence uncovered that there was anything criminally wrong," Haugh said.

But a separate administrative investigation into the misconduct allegations remains under way to determine if city policies were violated or whether officers failed to meet "performance expectations," according to Hudson's email to the council.

A profitable endeavor

Documents the City of Hampton provided to the Daily Press under a Virginia Freedom of Information Act request show Blue Water Tobacco was a cash-rich endeavor.

More than $3 million flowed through the undercover operation between its inception in June 2010 — with origins as a joint federal and city operation — and its abrupt end earlier this year.

After the undercover company paid for its product — the cigarettes — and all other expenses and debits, the firm's checking account at Langley Federal Credit Union had a balance of $718,496 as of Aug. 30, according to city records.

The city's documents show purchases of, among other things, nine vehicles; XM-Sirius satellite radio subscriptions; and plane flights, hotel accommodations, steakhouse dinners, "show tickets" and other costs related to what the city says were training trips to New York, New Jersey, Northern Virginia, Washington, D.C., and Las Vegas.

The documents show several "cash withdrawals" — sometimes thousands of dollars at a time — from the account, with no additional details provided to the Daily Press about the withdrawals.