Updated: 03/08/09 08:47 AM
FOCUS: INDIAN CIGARETTESIndian-made cigarettes seen as cheap, toxic and tax-free
The trouble withIndian cigarettes
By Tom Precious
NEWS ALBANY BUREAU
ALBANY - In Iroquois history, Seneca is a name of great pride, the Keepers of the Western Door.
But to thousands of smokers, from California to Florida and from the Caribbean to Mexico and especially in upstate New York, Seneca is something entirely different: a cheap cigarette that has prompted grave health concerns and dozens of lawsuits.
Billions of these Seneca brand cigarettes are made and trafficked within an hour’s drive of Buffalo and sold each year in a sophisticated distribution network. The Seneca brand is just one of a growing number of Indian-made cigarettes flooding the marketplace that has:
* Made health advocates worry that the cheap cigarettes are causing more people-especially teenagers-to get hooked on smoking.
* Failed to meet fire-safety standards and that may contain dangerous metallic elements.
* Prompted 30 states to sue, claiming the cigarettes are being sold illegally.
* Led the federal government, in January, to file a $21 million judgment against the owner of the Seneca brand for failure to pay a federal manufacturers' fee - and led to a bitter legal challenge over whether sales comply with the North American Free Trade Agreement.
Arthur Montour Jr., the Seneca entrepreneur who is behind the Seneca brand, did not return calls seeking comment.
But smoking opponents and government lawyers across the country were more than willing to discuss a booming business that they see as a health hazard as well as a legal travesty.
"The prospect of an Indian cigarette industry, unregulated by the state or even federal governments, is a public health time bomb," said Russell Sciandra, director of the Center for a Tobacco Free New York.
That's partly because the cheap Indian cigarettes provide smokers - including teenagers who buy over the Internet - an alternative at a time when states and now the U. S. government are boosting cigarette taxes.
"The real issue is price," said Gregory Connolly, a public health professor at Harvard University. With the explosion of cheaper Native American cigarettes, he said, "there will be far fewer quitters and increased consumption."
But there are other issues that could be of concern to smokers themselves.
Several of the Native American produced tobacco products do not meet New York’s fire-safe cigarette standards, a 2004 mandate that requires all cigarettes to be self-extinguishing, as a way to reduce smoking related fires. Several Indian brands purchased by The Buffalo News do not appear to contain special bands on the cigarette paper that serve as fire stoppers if smokers fall asleep with cigarettes in their hands.
And at least nine Indian brands, including Seneca - the king of Native American sales are not on the state's fire-safety approved list. The state, though, has done nothing to try to stop those sales.
Metallic elements: Researchers at Roswell Park Cancer Institute want to know, in part, because higher-than-normal levels of two metallic elements - strontium and barium - have been found in some of the brands. Both of those metallic elements can be radioactive.
Scientists believe the metallic elements, sometimes contained in contaminated soil, are absorbed by tobacco plants. Roswell Park scientists, in tests the past year using a lab in Scotland, have found Seneca Light cigarettes with strontium levels twice that of a leading non-Indian brand.
Roswell Park researchers don't know yet if the higher metallic element concentrations pose an added risk beyond the existing toxicity in cigarettes. The higher concentrations of the elements found in some Indian brands "is not something you want to find when lighting up," said Michael Cummings, a longtime tobacco researcher at Roswell Park.
And for states that want to regulate and tax cigarettes, the Indian brands themselves are something they wish they hadn't found pouring into their states.
The cigarettes are made at Grand River Enterprises, a plant on the Six Nations of the Grand River Indian reservation in Ohsweken, Ont., near Hamilton.
These Indian cigarettes are sold cheaply - sometimes a third the price of well-known brands - under names such as Buffalo Deluxe, Heron, Opal and Sky Dancer. And they are sold tax-free, both on the Internet and at Indian reservations across the country. As a result, 30 states have legal actions against those involved with the Seneca brand. Montour, through his firm, Native Wholesale Supply, in Perrysburg, owns the brand.
States claim the cigarettes are sold illegally and without some of the marketing and distribution protections required of other cigarettes.
As just one example, since 2004, at least 300 million Seneca cigarettes have gone through a Las Vegas holding facility at the Big Sandy Rancheria tribe in California, one of the states in court over the Seneca brand sales. That doesn’t include Internet sales, said Dennis Eckhart, head of the California attorney general's tobacco litigation and enforcement section.
The Seneca brand cigarettes violate California's fire-safety standards and are being illegally sold tax-free, Eckhart said.
"Those sales are taxable and fully covered by the laws of the state. They are not exempt," he said.
But Montour, in court filings, says third-party companies, not his, are responsible for any shipments to California.
In Idaho, which is also fighting the Indian cigarette flow in court, 90 million cigarettes have been shipped from Grand River's cigarette plant the past four years to a smoke shop on the Coeur d'Alene Indian Reservation.
"We're a very small state. That gives you an idea of the size of the operation," said Brett DeLange, chief of the consumer protection division in the Idaho attorney general’s office.
Montour and his business partners, in turn, have sued states, saying states are illegally trying to block commerce. Montour also claims that the Seneca brand's sales take place on legal, on-reservation markets.
The United States government, meanwhile, has not only slapped Montour's company for dodging required fees, but it is also in a legal battle over possible violations of the North American Free Trade Agreement.
"Clearly," the largest share of the market for the Indian cigarettes "exists, in reality, off reservation," according to a December filing by the U. S. Justice Department.
And much of the market exists in cyberspace. On one Web site - one of hundreds selling the brand around the country-a carton of 200 Seneca cigarettes was priced at $13, compared with $37 to $50 for well-known cigarettes. Not surprisingly, the cheap cigarettes are selling well, especially in Western New York.
Roswell Park found that in just two years, three Indian brands-Niagara, Seneca and Smokin’ Joes saw their market share in Western New York increase from seventh-tenths of one percent to nearly 21 percent. A person answering the phone at the makers of Niagara said the company is not Indian owned, although Indian online shops call Niagara an Indian brand and its address is listed on cigarette packs as Seneca Nation Territories in Irving.
Sales of Seneca cigarettes by Indian retailers have grown more than 200 percent from 2007 to 2008 in upstate New York, according to a confidential industry sales document. In all, Native American retailers sold 323,000 cartons - nearly 6.5 million cigarettes — of Seneca cigarettes last year, and that does not include the booming online trade. As an indicator of its popularity, Seneca sales far out-paced the 263,000 cartons of Marlboro cigarettes sold in the same region.
"They are huge and getting bigger and bigger," Frank Attea, a major Buffalo tobacco wholesaler to the Indians, said of the Indian-made cigarettes.
Just how big is unknown, though states have been trying to get those answers. They do know that Grand River, which produces Seneca and Opal cigarettes in a deal with Montour, saw cigarette sales go from 78 million in 1999 to 2.2 billion just five years later.
Grand River's principals - Jerry Montour, a member of the Wahta Mohawk tribe, and no relation to Arthur Montour, and Kenneth Hill, a member of the Lower Mohawk tribe - did not return phone calls. Nor did a South Carolina firm, Tobaccoville USA, also involved in the business.
Some industry executives believe the Seneca brand alone could push 10 billion cigarettes a year in volume.
Given its explosive growth and aggressive marketing, much of the focus around the country has been on the Seneca brand.
Montour, a former Seneca Tribal Council member, owns the Seneca trademark through his company, which was incorporated in 2001 with the Sac and Fox Nation in Oklahoma.
Seneca Nation President Barry E. Snyder Sr. said the Seneca Nation has no connection to the Seneca brand cigarettes.
"These cigarettes are manufactured in Ontario, not on our territories. The Nation is in no way responsible for them or their contents," he said in a statement.
After the cigarettes are made at that plant in Ontario, they are shipped to three sites: foreign trade zones in Lackawanna and Las Vegas, and a warehouse on the Cattaraugus reservation, court papers show.
From there, they go to any number of outlets on Indian reservations around the nation, where they are sold at casinos and smoke shops and online. In 2007, the Las Vegas facility handled 700 million cigarettes from the Grand River and Montour operation, one state investigator said.
The Seneca brand is licensed in both Canada and the United States, and cigarettes enter the country legally, having paid federal taxes, said Jeffrey Cohen, associate chief counsel at the Northeast office of the U. S. Bureau of Alcohol, Tobacco, Firearms and Explosives. After that, however, when distributors down the line begin selling them tax-free around the country and on the Interet, things change.
"At that point it becomes diverted to potentially illegal channels," Cohen said.