Wednesday, September 16, 2009

Smoking the Indians

There is some real question over whether or not the Indian cigarette dealers may have reached their own Little Big Horn-with the latest court decision on Long Island highlighting what could be the beginning of the end for this band of buttleggers. As David Caruso writes in the NY Post, the fate of one retailer-Rodney Morrison-may be the handwriting on the wall: "By 2007, one in every seven packs sold in New York state came from either Morrison's shop or three others on the reservation -- all four managed by people with a history of drug dealing, The Associated Press found in a review of court and business records. Those four stores sold 9.9 million cartons of cigarettes that year, or enough to supply every smoker in New York City with a pack a day for 3½ months. Now, it may all be going up in smoke for the cigarette kingpins of the Poospatuck reservation.

Here's why: "Dismayed by the lost tax revenue, New York City has waged a legal battle that could put shops like Morrison's out of business. This month, Poospatuck stores may have to begin collecting taxes because of a federal judge's ruling that untaxed sales to non-Indians are illegal."

And Morrison's criminal past seems to be endemic to the entire cohort of cigarette tax evaders: "Morrison, 42, is in deeper trouble. He could get up to 30 years in prison when he is sentenced Sept. 25 in a case in which federal prosecutors set out to blame him for a murder but wound up convicting him of illegally trafficking in cigarettes."

The other retailers on the reservation were also sterling characters: "Morrison wasn't the only person on the reservation with a checkered past. His estranged half-brother, Shawn, began managing The Golden Feather smoke shop after finishing a seven-year prison term in 2004 for drug dealing. The Smoking Arrow Smoke Shop was managed for a time by a former member of Morrison's drug crew. And Monique's Smoke Shop was run by a man who served six months for drug dealing in the 1990s."

So, is Poospatuck a precedent? And, if so, are the state's tax payers-not to mention beleaguered retailers losing sales to buttlegging-in for a deserved windfall? "The Poospatuck case is being watched closely. If the court decisions are applied to all reservation smoke shops statewide, they could doom a $6-billion-a-year business in Indian tobacco that now accounts for a third of New York's cigarette sales...Because the state doesn't collect sales taxes on Indian land, cigarettes bought there can cost less than half of what they do in New York City, which has the nation's highest tobacco taxes. In the city, a carton of Marlboros costs about $95, including $42.50 in state and local taxes."

And Caruso details the cowardice and nonfeasance of NY's governors-fearful to a man of enforcing the laws on the books that restrict Indians from selling tax free smokes to non-Indians: "But until now, the rule has never been enforced against the smoke shops themselves, despite the loss of more than $700 million a year in state and local tax revenue. Since the mid-1990s, New York governors fearful of stirring up tribal unrest have instructed state tax officials to leave the smoke shops alone."

The results have been sweet-at least until now-for Morrison, but not for the ripped off store owners: "And so, as state authorities looked the other way, Morrison's business boomed, grossing $172 million in one 4½-year period, according to bank records. He bought homes, land and businesses throughout the United States and Latin America, stashed $30 million in foreign banks and collected $1.7 million worth of luxury watches."

So, what's next? Caruso outlines the issue: "Since the trial, state courts have continued to send conflicting messages about the smoke shops' legal obligations. In July, a state appeals court threw out a case against a Cayuga Nation store in western New York, saying it could not be prosecuted for selling untaxed cigarettes. Things could come to a head in the next few weeks. In her Aug. 25 ruling in the city's lawsuit, US District Judge Carol Bagley Amon ordered the Poospatuck stores to start collecting taxes on sales to non-Indians in 30 days."

The confusion needs to be cleared up-and the legislature needs to find a way to hold the governor's shaking hands to the fire. There's simply too much money at stake-and not one new tax should be levied, or a single state program de-funded, if there's still hundreds of millions of tax dollars that are out there just waiting to be collected.