Customs officers discovered tonnes of contraband tobacco on which more than £1m duty should have been paid hidden in pairs of flip flops, a jury heard.
Employees at Big Yellow Self Storage in Leeds alerted HM Revenue and Customs because of the smell from some rented storage units which they suspected might be cannabis, Craig Hassall prosecuting told Leeds Crown Court yesterday.
They were wrong about the source of the smell but right that those involved were acting illegally, he claimed.
When the hundreds of cardboard boxes stored inside three units were checked tobacco was found sealed inside the soles of many of the shoes.
Inquiries were made about those renting and attending the units over previous weeks and that led the officers to a house in Waincliffe Mount, Beeston, Leeds, where they found a tobacco repackaging enterprise in the attic where counterfeit pouches of Golden Virginia and Amber Leaf were filled for onward sale.
Mr Hassall told the jury that living at the house were Zhi Qing Cai and Liu Hua Zhu who first went to Big Yellow Storage on December 11, 2009.
Cai, 34; Zhu, 23; and a third defendant, Jian Ming Chen, 36 of Grasmere Court, Armley, Leeds; each deny fraudulent evasion of duty.
Mr Hassall said: "The prosecution's case is that the three defendants in the dock were involving in receiving the tobacco, arranging storage and the onward disposal for the illicit tobacco trade."
The tobacco was imported without tax being paid on it. In this case the liability totalled 1,203,055 which should have gone into public funds.
It was estimated the repackaged tobacco could have been sold for almost 2m. "This is a big enterprise these defendants were involved in," he said.
He told the jury on January 14, some weeks after the first unit was arranged, an articulated lorry arrived at the depot and Zhu and Cai spent the day unloading cardboard boxes from it.
Because of the number involved, a second unit was arranged that day. Staff at Big Yellow were even offered flip flops as a gift afterwards.
Over the following weeks records showed the pair visited on a number of occasions removing a few boxes at a time. Sometimes Zhu had her children with her and they rode on the trolley as the boxes were moved.
On April 26 Cai attended with other men including Chen and a further delivery of boxes was made from an articulated lorry which was on site five hours. A third unit was needed because of the number of boxes involved.
Mr Hassall said it was the activity on that day and the subsequent smell from the units that led staff to phone the hotline to report their suspicions.
Customs officers attended the next day and found 915 boxes stacked in the three units. The boxes contained hundreds of pairs of flip flops.
Tobacco wrapped in plastic was found concealed in the soles of the vast majority of them.
Zhu was arrested that afternoon at the house in Waincliffe Mount and said: "I don't know what happened. I look after three children."
In the attic the officers found a room being used for tobacco repackaging including plastic tubs containing remnants of tobacco, scales, packaged pouches purporting to be Golden Virginia, empty Amber Leaf pouches and sheets of stickers used to seal them.
Chen was arrested in his vehicle nearby and in the glove box a large number of empty tobacco pouches were recovered similar to those from the attic. Tobacco was found at his home.
Mr Hassall said Cai was not found until October 10 last year when he was detained in Scotland after he paid 250 for a taxi to take him from Leeds to Glasgow which was stopped by traffic police in a routine check.
He had told the driver he was moving house and had with him seven laundry bags which were found to contain 212 kilos of hand rolling tobacco on which 27,500 duty was due.
The trial continues.