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$475k Penalty for Cig Trafficking on Reservation for Non-Indian Man

Gale Courey Toensing
10/14/13

 

A New York district court judge has ordered a $475,000 fine on a non-Indian man charged with illegally selling millions of tax-free cigarettes on the Poospatuck Reservation on Long Island.

Chief Judge Carol Bagley Amon of the Eastern District of New York said in court documents filed October 1 that Tony D. Phillips sold a reported 1,137,174 cartons of untaxed cigarettes between April 2008 and April 2009 in violation of the Contraband Cigarette Trafficking Act (CCTA) and the Cigarette Marketing Standards Act (CMSA). Phillips’ place of business was the Smoking Arrow Smoke Shop on Poospatuck Lane in Mastic, New York, which is part of the 55-acre reservation of the Unkechaug Nation, a state recognized tribe.

“It has nothing to do with us,” Unkechaug Chief Harry Wallace told Indian Country Today Media Network. “He’s not a tribal member. He’s just another non-Indian who’s trying to capitalize on the sovereignty of our people and he got caught doing something he shouldn’t have been doing.”

The lawsuit dates back to September 2008 when the City filed a complaint in District Court against eight smoke shops as well as individuals who owned and operated the smoke shops. The eight corporate defendants include: Peace Pipe Smoke Shop; Red Dot & Feather Smoke Shop; TDM Discount Cigarettes; Monique’s Smoke Shop; Smoking Arrow Smoke Shop; Golden Feather Smokes, Inc.; Kimo Smoke Shop, Inc.; and Smoke & Rolls. The City alleged that the defendants violated the Contraband Cigarette Trafficking Act by selling cigarettes on which the state and city taxes had not been paid. During the course of the lawsuit, five of the smoke shops voluntarily stopped operations, according to court documents, and the three remaining smoke shops – Peace Pipe, Red Dot & Feather and TDM – are required to pay over $10 million in taxes to New York City for trafficking untaxed cigarettes and possibly other undetermined damages and attorneys’ fees.

Phillips was singled out for special attention. In December 2011, the court granted the City’s motion for a default judgment “as to the direct CCTA and CMSA liability of defendant Tony Phillips, an employee and main operator of the Smoking Arrow Smoke Shop.” The City sought an award of civic penalties against Phillips in the amount of $591,330.48. Since the CCTA does not specify the amount of damages for violations the court used the penalty provisions of the Prevent All Cigarette Trafficking Act (PACT) as a guideline, calculating 2 percent of Smoking Arrow’s estimated gross sales for 2008-2009. In reducing the $591,330.48, the court considered. Among other things, a $10,000 settlement with Smoking Arrow Smoke Shop owner Denise Paschall and the state’s “forbearance policy” in which state tax authorities said cigarette taxes were due from retail sales on Indian land to non-Indians, but did nothing about it.

In a Poospatuck related case last month, another non-Indian, Rockville Centre resident Joseph Ruda, pleaded guilty personally and on behalf of his company, Gutlove and Shirvint, Inc., to charges of cigarette smuggling, the Long Island Herald reported. Ruda shipped untaxed cigarettes to several smoke shops on the Seneca Indian Nation’s Cattaraugus Indian Reservation in upstate New York, then immediately putting them onto a second truck bound for the Peace Pipe Smoke Shop on the Poospatuck Indian Reservation where the cigarettes would be sold in bulk to bootleggers, who in turn sold them in New York City, the report said. The scheme resulted in a loss of more than $1,440,000 for New York. The plan was developed after Gutlove and Shirvint entered into an agreement with the Phillip Morris Corporation to stop selling cigarettes to the Peace Pipe Smoke Shop, which was Gutlove and Shirvint’s biggest customer. Phillip Morris found out that the Peace Pipe Smoke Shop was allegedly involved in criminal activity and threatened to stop selling cigarettes to Gutlove and Shrivint if it didn’t stop selling to the Peace Pipe Smoke Shop, the report said. Ruda forfeited $325,000 in cash to the government and faces up to six months in prison; his company faces a fine of up to $250,000. It has already made $1,446,000 in restitution payments to New York.

The criminal activities of non-Indians on Unkechaug land is a source of endless frustration, Wallace said. “All these people that they’re prosecuting are not Indian and not Unkechaug. There are non-Indian criminal elements on all Indian land. You kick them off and what happens? They come back like a bad growth.”

The Nation has passed limitation laws and resolutions to prevent wholesale distribution from its territory, “but my question [to the state] is, why not work with us to make sure a legitimate process is in effect?  Every time one person does something wrong that’s connected to Poospatuck in some way the whole reservation is condemned. We get blamed for everything,” Wallace said. “What do you do about it? You try to let people know as best you can that this is wrong and continue to live your life.”

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