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Recent cigarette seizure trend sparks disagreement between Mohawks, state

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AKWESASNE - St. Lawrence County District Attorney Nicole Duve’s office has handled cigarette seizure cases before, but none quite like recent ones.

Past seizures typically came from a U-Haul truck, van or other small vehicles, Ms. Duve said. But lately, law enforcement have seized large tractor-trailer loads of product coming off the St. Regis Mohawk Reservation, carrying hundreds of cigarette cases from federally licensed manufacturers.

“We haven’t historically seen these types of cases,” she said. “It just seems to have happened in the last few months.”

Her office is at the center of a growing dispute between the New York state Department of Taxation and Finance and the federally licensed cigarette manufacturers on the St. Regis Mohawk Reservation. The state wants all reservation produced cigarettes heading elsewhere to proceed through a licensed stamping agent, a regulation the manufacturers disagree with. Stamping allows the state to track the cigarettes and ensure they are taxed when necessary, according to Department of Taxation and Finance spokesman Geoffrey T. Gloak.

Law enforcement have seized cigarettes without that stamp.

“All cigarettes processed within the state are presumed to be subject to New York state taxes,” he said. “If cigarettes are transported in New York state, they need to either be stamped or on their way to a stamping agent.”

“If we learn of the possession of untaxed cigarettes, we make a determination on a case by case basis of whether the possession is lawful or not,” he added.

But the manufacturers believe they are operating legally without the stamped products, according to attorney Lorraine White, a former St. Regis Mohawk tribal chief. She serves on the tribal council’s tobacco manufacturing committee and has worked with the cigarette companies in the past.

The manufacturers do not consider their cigarettes subject to state tax or stamping because they are produced on a reservation and sold to another reservation, she said.

“Because it’s made on Indian land, no New York state tax could ever apply,” she said. “It’s not sold in New York state. It wasn’t processed in New York state.”

The manufacturers never had these seizure problems in the past, she said.

“This approach may reflect a new policy and a new attitude,” she said. “New York state is attempting to impose regulations on product that is not subject to such law.”

Stamping would cause additional fees and expenses for the manufacturers, Ms. White said. Mandating stamping is just another way for the state to capture revenue from the reservation, she said.

“They’re not stamping those products for free,” she said of the state. “This is their way of imposing a New York State tax on a product manufactured on sovereign Indian territory.”

There have been six seizures of federally licensed product from companies like the Tarbell Management Group and Native brand since January, Ms. White said. The seizures have taken place in St. Lawrence, Franklin and Clinton counties.

The value of a tractor-trailer load is between $700,000 and $750,000, she said. The companies, which each employ dozens of employees on the reservation, can only afford so many seizures, she said.

“It’s a growing concern within the community,” she said. “There’s a lot of people here who are nervous about their employment and about the future of the manufacturers.”

One company has filed a lawsuit. HCI Distribution Inc. of Nebraska’s Winnebago Reservation purchased a tractor-trailor load of cigarettes from Ohserase Manufacturing LLC, Hogansburg, owned by Tarbell Management Group.

After leaving the reservation on Jan. 23, the HCI truck was stopped and nearly $2 million of cigarettes were seized by state police and taken to Albany. HCI Distribution has since sued the state police and the District Attorney’s Office to release their product.

Ms. Duve’s office has not pressed charges against any party in the matter.

A state Supreme Court judge heard oral arguments on the case earlier this month but has not made a ruling. In court, Assistant Attorney General Aaron Baldwin, Albany, said the cigarettes are subject to stamping if they are leaving a reservation and going to a different reservation. He said he was worried any unstamped cigarettes coming from the St. Regis Mohawk Reservation are going to Nebraska but making their way back into New York. Ms. Duve said her office is reviewing the several seizures referred by law enforcement very closely. While seized, the cigarettes end up in a warehouse near Albany.

She was not aware of any recent push to crack down on Mohawk brand cigarettes without a state tax stamp. “It’s not anything I have heard or seen,” she said. “I don’t believe there to be such a directive.”

The district attorney’s office is taking its time in reviewing each case, Ms. Duve said.

“We’re looking at these really in this particular context for the first time ... These particular facts are new and unique,” she said.

The office is only trying to ensure the cigarette manufacturers are following the law, she said.

“If it amounts to a misunderstanding or an oversight, I’m certainly not interested in expanding prosecutorial resources in matters such as that,” she said.

The St. Regis Mohawk Tribal Council has sided with the manufacturers. In a letter dated April 2 to Ms. Duve, the three tribal chiefs agreed the manufacturers should not be required to go through a state stamping agent.

“It appears that your office is targeting our tribal members’ legitimate businesses that are doing nothing more than to ship legally manufactured products for sale to a buyer in another state,” the chiefs noted. “The St. Regis Mohawk Tribe will not take this matter lightly and will do whatever we can to protect our tribal member businesses and commerce in our territory, especially when that commerce is between our tribe and another sovereign Indian nation.”

Chief Ronald W. LaFrance said the council was following the matter very closely.

“There are other tobacco manufacturers in New York state. Are they going after those manufacturers as well?” he asked. “I don’t believe they’re required to go through a stamping agent of New York state. We haven’t found any law that states otherwise.”

Ms. White said the Mohawk reservation appeared to be singled out. The recent seizures are especially puzzling, Ms. White said, because of a leaked memo last summer from Peter Persampieri, the director of investigations from the criminal investigation division of the Department of Taxation and Finance. In the email, Mr. Persampieri said cigarettes being transported from one reservation in New York to another or to an out-of-state reservation should not be seized.

“We can’t help but come to the conclusion that somehow, this is being motivated,” she said. “We’re not aware of any other reservation experiencing this type of onslaught. Why have the Mohawk people? Why now?” she asked.

Representatives from Tarbell Management Group and Native Trading declined comment for this story.

Staff writer Josh Gore contributed to this story.

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