Undercover Cigarettes - NYC tapes illegal cig sales on reservation

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By Sara Kugler Frazier
New York City (AP) September 2010

New York City investigators secretly videotaped cigarette dealers on a Long Island Indian reservation illegally selling untaxed smokes for re-sale at city bodegas, officials said last week.

The sting operation - during which one seller says on tape “the less I know, the better” - is part of Mayor Michael Bloomberg ongoing fight to stop reservations from selling untaxed cigarettes that end up in New York City. He has long complained the practice cheats the city out of tax revenues.

Native Americans are allowed to buy untaxed cigarettes on reservations, but only for personal use and not for resale.

In an effort to prove shops are flouting the law, Bloomberg’s administration sent undercover investigators to the Poospatuck reservation last week.

The investigators, who wore hidden cameras, told two separate sellers they were buying cigarettes to sell in New York City, and were able to purchase 60 cartons of untaxed smokes.

“I have to do a re-sale, you know, in Brooklyn,” said one investigator who bought 30 cartons of Newports.

“I don’t want to know any information that you’re talking about because our cigarettes are for personal use,” the saleswoman told him. “Should I know that you’re going to resell them, I can get in trouble. So the less I know the better.”

In the other videotaped sale, the investigator told the saleswoman: “I have to resale, I have to make, basically, you know some money on it.”

Unkechaug Nation Chief Harry Wallace suggested in a statement that the tape was edited and said the tribe does not support breaking the law.

“Our goal is to protect the lawful retail trade of tobacco for personal use,” he said.

Wallace, along with the Oneida Nation last week, also blasted Bloomberg for his remark last month that the governor should get “a cowboy hat and a shotgun” and enforce the state tax law.

“Now the mayor is retaliating instead of apologizing for his indefensible statements,” Wallace said.

Some of the largest shops on the Mastic, N.Y., reservation have been effectively shut down by a federal judge who ordered them to stop selling tax-free cigarettes to customers who weren’t members of the tribe.

Those stores, however, have been replaced by new shops not covered by the court order.

State records show that cigarette sales on the reservation have dropped, but business continues to be robust. The city has accused several merchants who were covered by the court order of secretly reorganizing and continuing to do business through relatives or front companies.

“We will keep the heat up on smoke shops who make illegal deals with traffickers,” Bloomberg said. “Let this be a warning to anyone selling bootleg cigarettes - it is time to clean up your act. We are not going to stand around and do nothing.”

New York’s Indian tribes say treaty rights exempt them from having to pay the state’s $4.35-per-pack sales tax on cigarette purchases from wholesalers.

For decades, state authorities have hesitated to enforce it out of deference to their sovereignty claims.

Gov. David Paterson announced the state would begin collecting the tax, but the effort was delayed after some tribes sued in federal court in Buffalo.

An appeals court this week declined to block the enforcement of the new law, giving the go-ahead to the state to begin collecting the tax.

Associated Press Writer David B. Caruso contributed to this story