NEW YORK - Mayor Michael R. Bloomberg, Chief Policy Advisor John Feinblatt, Corporation Counsel Michael A. Cardozo and Finance Commissioner David M. Frankel have announced the results of an undercover investigation into illegal cigarette sales at the Poospatuck reservation onLong Island. Two cigarette dealers were caught on tape illegally selling large quantities of cigarettes on which State and City taxes had not been paid. According to the US Census Bureau, there were 296 people living on the Poospatuck reservation last year, yet the reservation’s smokeshops have so far sold more than four million cartons of un-taxed cigarettes in 2010.  That works out to more than 523 packs a day for every man, woman, and child living on the reservation.

“A law intended to protect the sovereignty of Native Americans has been exploited to fill the pockets of bootleggers and crooked cigarette dealers,” said Mayor Bloomberg. “Although New York City has won some significant victories in the courts, smokeshops on the Poospatuck reservation continue to violate the law and sell un-taxed cigarettes to bootleggers who openly state that they are buying them for resale in New York City.”

“In 2009, sales of un-taxed cigarettes on reservations accounted for one third of all brand-name cigarette sales in New York,” said John Feinblatt, the Mayor’s Chief Policy Advisor. “That adds up to nearly a billion dollars in lost tax revenue the State and City could have used during these tough times.”

“This video confirms our ongoing allegations that cigarette sellers on the Poospatuck Reservation are flouting the law,” said Corporation Counsel Michael A. Cardozo.  “Native Americans have every right to sell to reservation residents, but that’s not what’s going on here.  New York City’s residents become the victims of the illegal game being played by unscrupulous sellers.  We’ll continue to pursue our cases aggressively, using our full legal arsenal.”

“This is another example of legitimate businesses being criminally undercut by those who steal from the City coffers,” said Finance Commissioner Frankel. “We will use all civil and criminal enforcement mechanisms at our disposal to go after anyone who thinks they can cheat the people of this city and get away with it.”

The Department of Finance’s Office of Tax Enforcement is responsible for detecting and working with prosecutors to punish the criminal evasion of New York City’s tax laws.  Last week, working with the Mayor’s Financial Crime Task Force, the City’s Department of Finance sent undercover investigators to two of the approximately forty-nine cigarette sellers on the Poospatuck reservation. The investigators stated that they were buying cigarettes for re-sale in the city and were able to purchase 60 cartons of un-stamped, un-taxed cigarettes.

            Native Americans are permitted by law to purchase and possess unstamped cigarettes on which taxes have not been pre-paid, but only for personal use or re-sale on the reservation to other tribe members. Stores on the Poospatuck Reservation illegally sell cigarettes to bootleggers in sales that are subject to taxation.

            The Federal Contraband Cigarette Trafficking Act, 18 U.S.C. § 2341, makes it a felony – and also gives rise to civil liability – to sell cigarettes without tax stamps in states where the cigarettes are subject to tax.  The New York Cigarette Marketing Standards Act also includes civil liability for selling cigarettes without including amounts for all taxes required by law.  Cigarettes sold by Native Americans to the public are taxable and by law must bear tax stamps in New York.

            In September 2008, Mayor Bloomberg and Corporation Counsel Cardozo announced that the City had filed a complaint in the Federal District Court for the Eastern District of New York against eight Long Island businesses located on the Poospatuck reservation for illegally selling cigarettes on which State and City taxes had not been paid, in violation of the Federal Contraband Cigarette Trafficking Act and State law. The City’s investigation had documented sales by these reservation businesses of nearly 24 million cartons of contraband cigarettes since 2004.  In August 2009, Judge Carol B. Amon issued an injunction barring further sales to the public of untaxed cigarettes by the defendants named in that suit.