Posted on 09/04/2003 6:04:47 AM PDT by CSM
Federal authorities have arranged to sell most of the 32 million cigarettes taken during the largest seizure ever of tobacco headed to Indian smoke shops in Washington.
The 1.6 million cigarette packs, all lacking a tax stamp, were swept up in a May raid of smoke shops in North Idaho and Washington. Rather than let the cigarettes grow stale, federal prosecutors in Spokane earlier this month got permission to send 20 million of them to the wholesale market. The profits will go into a trust account until the forfeiture case is completed.
With a grand jury still gathering records and criminal indictments possible, the U.S. attorneys declined to talk about the investigation. But court documents filed last month in U.S. District Court in Spokane describe a multimillion-dollar smuggling operation intended to skirt Washington's $1.42-per-pack tax.
Assistant U.S. Attorney Jim Shively said he believed the seizure was one of the biggest civil forfeitures ever for the Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF), and state tobacco-tax regulators said their largest seizure — of fewer than 500,000 packs — paled in comparison.
"That's the biggest I've ever heard of," said Mike Gowrylow, spokesman for the state Department of Revenue.
State and federal authorities have long-running cigarette battles with tribes that feel such raids violate their sovereignty. Tribal members can buy untaxed cigarettes, but it is illegal for non-Indians to avoid the hefty tax, which funds health programs.
Washington's Department of Revenue estimates that more than one-third of cigarettes smoked each year are untaxed, costing $240 million in lost revenue. The seized cigarettes represent $2.3 million in tobacco taxes, plus sales tax.
In May, ATF agents, backed by the Washington State Liquor Control Board, seized the cigarettes, along with $777,000 in cash, from a cigarette distributor in Plummer, Idaho, and smoke shops on the Puyallup and Yakama reservations.
Most of the cigarettes were cut-rate brands, with names like Nise, Sweet Dreams and Smokin Joes. Search warrants have been sealed.
In court filings, U.S. attorneys said the cigarettes violated the federal Contraband Cigarette Trafficking Act because they lacked a stamp that showed state taxes had been paid. Prosecutors said the seized cash was linked directly to the sale of contraband smokes.
At least four tribes have signed compacts that allow them to collect the $1.42-per-pack tax and keep the revenues. But others have resisted making any agreements with state government, claiming sovereignty.
John Weymer, a spokesman for the Puyallup Tribe, said the tribe has been negotiating with the state for a compact for two years.
"We are a sovereign nation, a country within a country, and any type of business that goes on within the reservation is regulated by the tribe," he said. "Cigarettes are part of that."
Although one of the businesses targeted by the ATF was licensed by the Puyallup Tribe of Indians, the owner is a private businessman, Weymer said.
The focus of the raid was JKL Enterprises, a North Idaho distributor that bought $36 million in wholesale cigarettes between April 2002 and March 2003, according to an ATF audit of the company's records. It's unclear how much JKL took in; a employee told agents much of the business was done in cash, in deals as large as $100,000.
An attorney for JKL's owner, Louie Mahoney, was unavailable yesterday.
Two of the company's biggest customers were the Little Brown Smoke Shop in Zillah, Yakima County, and the Indian Smoke Shop in Milton, Pierce County. During the investigation, agents bought untaxed cigarettes at both sites and found boxes of untaxed cigarettes at businesses.
Allen Ressler, an attorney for Indian Smoke Shop owner David Bean, agreed to let U.S. attorneys sell his client's cigarettes to avoid them becoming stale. But he questions whether agents had enough probable cause to seize the cigarettes, and he said his client had a right to sell untaxed cigarettes to tribal members.
"At this juncture, we're still in the position to, hopefully, negotiate a resolution of the entire issue," Ressler said.
Jonathan Martin: 206-464-2605 or jonathanmartin@seattletimes.com
Copyright © 2003 The Seattle Times Company
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.