Originally Posted By: bluezone
Uncollected Tax Dollars

January 15, 2008
We thought you would be interested in the following letter that has been sent to the members of the Legislature by Mr. Arthur H. Katz, Executive Director of the NYS Wholesale Marketers and Distributors.

January 10, 2008

Dear Legislative Member:


Why do we continue to permit annual sales of 400 million packs of untaxed cigarettes to Indian sellers when it is known that illicit reselling is funding terrorism?

In America, our greatest triumph is adherence to the rule of law. Where laws end, terrorism begins. In 1994, the United States Supreme Court ruled (in Attea v. New York State) that New York was within its right to tax all cigarette sales to non-tribal members. Yet in the twelve years since that ruling the Pataki administration did not attempt to apply the law to a single Native American sale. Therefore, lacking accountability, these untaxed sales have reached an astounding 40 million cartons annually with lost revenue to New York State of $20 million per week or one billion dollars per year.

*It should be noted, since our first letter dated August 6, 2007, New York State has lost an additional $440 million in revenue, why?

Shame:Major illegal profits from these sales are funding terrorism while the New York State treasury is robbed!

The connection between Native American untaxed cigarette distribution and the funding of terrorism is well established and documented by New York and Federal agencies, public officials and numerous criminal court cases. Among some recent examples:

New York City 11/03/2007, Rep. Anthony Weiner and state senator Jeff Klein, in calling for a congressional investigation and putting additional teeth in existing federal laws , issued a press release that documented several recent government cases which uncovered the funding of Hamas, Hezbollah and other terrorist groups. They also quoted public officials who have stated that illegal cigarette profits have become one of the leading sources of domestic terrorist funding. ATF agent Patrick Awe, who testified before the US Senate, stated "... the link to terrorism has been established".

v Cattaraugus Indian Reservation 09/20/2006, Karim H. Nassar from Canada pleads guilty to smuggling $500,000 of cigarettes off the reservation for general market consumption and sending profits to Hezbollah guerillas.

v Dearborn, 05/29/05, nineteen men are federally indicted for a smuggling operation that evaded "tens of millions in state cigarette taxes" by purchasing truck loads of untaxed product from a Western New York State Indian Reservation and reselling in New York and Michigan. The profits were funneled to Hezbollah.

v The New York State Tax Enforcement Group arrested a couple in Brooklyn who were part of a group of 200 terrorists smuggling and reselling into New York City.

v Police commissioner, Ray Kelly in a speech before the United Nations, states that the smuggling of cigarettes is the leading means of funding forterrorist organizations.

v New York Post 10/16/07 State Senator Martin Golden who sits on the Homeland Security Committee, states that "ATF has opened hundreds of illicit cigarette trafficking cases; ... [having] links to extremist groups such as al Qaeda ... He adds that ATF senior intelligence analyst William Billingslea wrote in the Police Chief Magazine that, "Because of the immense profit, illicit cigarette trafficking now rivals drugs as the method of choice to fill the bank accounts of terrorist groups." Golden goes on to say, "The solution is simple. Both federal and state laws are already in place, and the courts have reaffirmed their constitutionality. What we need now is a governor with the guts to enforce them. The result of not enforcing the law has transcended the issue of Native American sovereignty into an issue of national security."

Shame: Why has leadership not acted to enforce the law and protect public safety?

v Newsday 11/06/2007, "Trial of smoke-shop millionaire set to begin". In a criminal case heard before the Eastern District Court, RodneyMorrison a Costa Rican, who is an "Indian" through marriage, has offered to put up $56 million cash for bail. This criminal case involves massive amounts of cigarettes that were sold tax free to and from an Indian reservation.It certainly should not surprise anyone that the purchase of tens of thousands of cartons of cigarettes from just one of these Indian stores is not for personal consumption. The Distributor who supplies the "store" should know that those cartons cannot be consumed legally without taxation. The manufacturers who supply the distributors receive a mandatory report each week that states how many cartons go towhom, and yet continue to allocate and sell this product. These outlets are the major source of counterfeit and untaxed cigarettes sold in high taxed localities (NY) to complicit stores and street merchants.

Shame: Manufacturers who are allocating and their distributors who are selling should have knowledge of the laws requirements.

On April 12, 2005 legislation was passed that required the collection of taxes on all Indian sales of cigarettes, motor fuel and other products to non-Indian New Yorkers starting 3/1/06 (without exception) and was signed into law the next day. It was with both courage and conviction that Sheldon Silver and Joseph Bruno led the legislature to overturn Pataki's ill-advised veto, demonstrating their understanding of the urgency for stopping this outflow. The methodology of tax stamping of all cigarettes and the issuance of "exemption coupons" to tribal members was conceived 12 years ago and favorably ruled upon by the US Supreme Court.

Shame: NYS State government still continues to invent ingeniousexcuses for non-enforcement.

During his final year in office, Attorney General Eliot Spitzer, in various correspondences, made it crystal clear that current law prohibited the shipping of untaxed cigarettes within New York. And further, that manufacturers, truckers, distributors and Indian traders who aided and abetted or criminally facilitated these shipments would be guilty of crimes against the State. Recently, Attorney General Cuomo, under an order from the Federal Eastern District Court, testified that the state's policy of forbearance (i.e. non-enforcement) was not a valid defense for the causing to be sold or the causing to be shipped of untaxed cigarettes for resale to non-tribal members. In another criminal case heard before the Eastern District Court; Judge Hurley ruled that there was knowledge of the illegal use and therefore criminal aiding and abetting.

Shame: As yet, there is no State enforcement and criminals and terrorists continue to grow rich.

The Math:

From 1996 - 2006 there was a recorded twenty percent reduction in the national

cigarettes sales (excluding New York State).

In 1996 New York State Taxes were paid on 127 Million Cartons Sold.

In 2006 New York True Consumption should have fallen to 102 Million Cartons

Actual 2006 New York State Legal cartons sold amounted to only 62 million!

That equals a loss of 40 million cartons sold in 2006!!


A $Billion give away of our taxes!

It is patently absurd to argue that Native American sovereignty can only be preserved by allowing them unregulated access to FORTY MILLION cartons of untaxed cigarettes annually. This would amount to a staggering EIGHT BILLION cigarettes smoked per year by 2,500 adult Native American smokers in New York.

Shame: Let us not fall asleep at the switch again! Solution: Tax Stamp all cigarettes!

Summary of some Applicable Laws that may be violated are:

The Jenkins Act; The Contraband Cigarette Trafficking Act 18 U.S.C.Sec.2342; New York Public Health Law1399II; NYS Tax Law, Article 20, Sec. 471E; Criminal Facilitation, Article 115 NYS Penal Law; provisions under The National Security Act.

Why have we suffered 12 years of non compliance and the feeding of terrorists? Why have the cigarette manufactures continued to allocate millions of cartons of cigarettes to Indian sellers knowing exactly what is being shipped to each Indian store? Why has Albany not exercised its duty to protect its citizens by simply upholding the law? Why have these complicit venders been permitted to become the leading source of untaxed cigarettes sold in the 50 states? It certainly cannot be up to Native Americans, manufactures, or recalcitrant Public Officials to dictate the terms of our safety. Our Supreme Court has already spoken. Now our elected officials must act by recognizing that where law dies, terrorism lives.

Shame: The failure of Government and manufacturers to act in these past twelve years is a classic case of politics and greed vs. country!


Arthur H. Katz

Executive Director