Indian reservation cigarettes under fire in NY

AP News
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Posted: Dec 10, 2009 3:12 PM

The City of New York has accused several cigarette dealers on a Long Island Indian reservation of secretly defying a court order that was supposed to have shut them down.

The charge is the latest in a legal battle between New York Mayor Michael Bloomberg and smoke shops on the Poospatuck Indian Reservation over the sale of millions of dollars in untaxed cigarettes.

In August, a federal judge ordered most of the largest shops on the reservation to stop selling untaxed packs to the general public, saying such sales were illegal, despite the state's tolerance of the practice.

Publicly, the shops promised to abide by the ruling, but in a motion filed in federal court on Wednesday, lawyers for the city said three dealers quietly continued to do business through newly formed cigarette stores not covered by the court order.

"It shows contempt for the court's authority," said Eric Proshansky, an attorney for the city.

The tribe's chief, Harry Wallace, didn't immediately return a phone and e-mail message from The Associated Press on Thursday, but told Newsday that the allegations are false.

The city has asked U.S. District Court Judge Carol Amon for thousands of dollars in penalties against the three dealers.

Lawyers for two of the dealers declined comment. Richard Levitt, a lawyer who represents dealer Wayne Harris, wouldn't discuss his client's case in detail but said, "the evidence will show that he is not in contempt of the court's order."

In August, Amon ruled that the tribal shops' longtime practice of selling cigarettes without collecting required state taxes was illegal.

She ordered eight shops to stop selling cigarettes to anyone who wasn't enrolled in the tribe, and barred 11 people affiliated with those stores from further sales to the general public. The three dealers were all named in that order.

The shops have appealed, but all had also publicly claimed to have ceased operations by September.

City lawyers didn't buy it, and investigated with the assistance of agents from the state's tax enforcement division.

The case is being watched closely because of its potential effect on other Indian reservations around the state.

Shops on tribal land now account for nearly a third of all cigarettes sold annually in New York. This booming business is a product of the state's longtime reluctance to collect taxes on cigarettes sold on tribal land, which means reservation shops can offer tobacco at a huge discount.

Relatively few shop owners have ever been charged in criminal court over their dealings in untaxed cigarettes.