Justice Dept. Launches Probes of Gasoline Tax Evasion : Crime: Estimates put lost revenues at $1 billion a year. The Mafia and some legitimate businesses are suspected. Los Angeles is one site of investigations.

Moving to stop organized crime and some legitimate businesses from siphoning off at least $1 billion of gas taxes a year, the Justice Department has launched 100 investigations in 18 cities, including Los Angeles, officials said Monday.

“There’s just enormous, enormous money to be made by those who are able to find a way to basically evade payment” of federal and state gasoline taxes, said Shirley Peterson, assistant attorney general in charge of the department’s tax division.

Organized crime hatched the schemes that were first uncovered in the mid-1980s. Because of the success of the evasion, “we are very concerned that legitimate businesses are tempted to engage in the schemes as well,” Peterson told reporters.

In the first such conviction last month, Getty Terminals Corp., a Getty official and two independent wholesalers were found guilty by a Long Island federal jury of conspiracy and tax evasion in a scheme in which Getty Terminals evaded more than $1 million in gasoline excise taxes.

Getty Terminals faces a possible $2-million fine, and the three individual defendants each could receive sentences of up to 20 years in prison and fines totaling $1 million.

In all, the Justice Department has obtained 25 convictions since it began investigating in 1987.

James A. Bruton, deputy assistant attorney general in the tax division, declined to specify other “legitimate” businesses under investigation, saying only, “we’re always looking.”

The Dec. 1 hike in the federal gas tax from 9.1 cents a gallon to 14.1 cents, coupled with state excise taxes--soon rising to 15 cents a gallon in California--add to the magnitude of the problem, Peterson said.

Referring to the tax increase, Peterson said, “the word on the street is, ‘thanks a lot for the early Christmas present.’ ”

She said her “guess” is that the estimate of $1 billion in evaded tax revenues annually is low, citing signs that the evaders are now moving into diesel fuel as well as gasoline.

Bruton said the complex schemes used by the evaders “test the perseverance of prosecutors and agents to go through mountains and mountains” of paperwork to detect and pin them down.

The methods include “simple false invoicing,” setting up shell companies, mislabeling products and smuggling gasoline, according to Bruton.

“Each day, we see a new scheme,” he said.

Although the per-gallon federal tax appears on service station pumps, the tax generally is paid to the Internal Revenue Service further “upstream,” or earlier in the process, after gasoline is imported, Bruton explained. The tax then is “passed on” to consumers as the retailer and wholesaler recover their costs, including the tax.

While the evasion was first detected in the New York area, it has spread to California, Florida, Texas and the Midwest, Peterson said.

In Los Angeles last week, a federal grand jury indicted six gasoline wholesalers on charges of conspiracy and tax evasion, and others are under investigation, Bruton said.

Four of New York’s five Mafia families levy a “mob tax,” which amounts to 1 to 2 cents a gallon of protection money for those running the evasion schemes, according to James Rodio, a lead Justice Department prosecutor in the cases.

Despite the budget crunch, Peterson said the tax division is seeking 10 attorneys to add to the nine-member task force currently handling the cases--with the aid of U.S. attorneys in the field.