December 22, 2012

Untaxed-cigarette lawsuit filed by state AG


NEW YORK — Untaxed cigarettes reportedly headed for sale on Ganienkeh Mohawk land in Altona are part of a lawsuit filed by the New York Attorney General’s Office. 

The suit alleges a Washington-based company has sold hundreds of thousands of such cigarettes in New York state.

Filed Friday in U.S. District Court for the Eastern District of New York, the complaint is against Mountain Tobacco Company, dba King Mountain Tobacco Company, and its president, Delbert Wheeler. The suit alleges the company illegally sells hundreds of thousands of its cigarettes in New York each year without paying the required state excise taxes, in violation of both state and federal law.

“Illegal sales of untaxed cigarettes are a major public health hazard,” New York Attorney General Eric Schneiderman said in a press release. “King Mountain Tobacco is making cheap cigarettes available and encouraging young people to take up a deadly habit. 

“These illegal sales deprive the state of hundreds of thousands of dollars of much needed tax revenue and put law-abiding businesses at a competitive disadvantage. 

“New York is committed to stopping such contraband sales.”


The lawsuit, the result of an ongoing investigation into contraband cigarette sales across the state, is based on several incidents, the attorney general said.

On Nov. 6, investigators from the Attorney General’s Office purchased unstamped King Mountain cigarettes from a smoke shop on the Poospatuck Reservation in Mastic on Long Island. The purchases came as investigators spotted more than 50 cartons of the brand on display in the store.

On Dec. 3, State Police stopped a truck on Interstate 87 near Peru that the suit says intentionally sped up to avoid a routine commercial checkpoint. During inspection, the truck was found to be carrying 84,000 packs, or 8,400 cartons, of unstamped King Mountain cigarettes. 

Police said its destination was Ganienkeh.


According to the complaint, King Mountain sells and distributes its cigarettes in New York without shipping them to a New York State-licensed stamping agent as required by state tax laws. Licensed stamping agents are the only entities in the state authorized by the New York Department of Taxation and Finance to affix a tax stamp and collect the excise tax due, the release said. 

On-reservation cigarette sales to tribal members can be made tax-free, but those cigarettes must nonetheless have the tax stamp affixed by a licensed stamping agent.

The federal Contraband Cigarette Trafficking Act makes it unlawful to possess, sell or distribute more than 50 cartons of untaxed cigarettes in a state, such as New York, that requires tax stamps and tax collection. 


Defendants also violated the federal Prevent All Cigarette Trafficking Act and New York State tax and public health laws by not reporting the sales to the Department of Taxation and Finance and by not certifying that their cigarettes are fire-safe, as required, the suit says. 

The potential tax loss to the state from just this one shipment is more than $365,000.

Wheeler and his company face up to five years in prison and $25,000 in fines.

The matter is being litigated by Tobacco Compliance Bureau Assistant Attorney General Marc Konowitz under the supervision of Tobacco Compliance Bureau Chief Dana Biberman and Executive Deputy Attorney General for Social Justice Janet Sabel.

Find the complaint at:

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