The federal government has seized more than $266,000 from the bank account of a tobacco company owned by the Seneca-Cayuga Tribe of Oklahoma and detained a tobacco wholesaler in New York as part of a multistate investigation into the alleged illegal trafficking of tens of millions of dollars worth of untaxed cigarettes.
Chuck Craig, general manager of the Seneca-Cayuga Tobacco Co., declined to comment Wednesday on the seizure of tribal tobacco company's funds, citing the advice of attorneys.
The Seneca-Cayuga Tobacco Co. of Grove is one of about 20 companies and individuals from Oklahoma, Missouri, New York, Nebraska, Florida, Washington and Canada that federal prosecutors allege were “subjects” or “persons of interest” in a complex conspiracy to illegally traffic in untaxed cigarettes.
Kansas City prosecutors filed a 101-page court action in June seeking the forfeiture of more than $2.6 million from alleged conspirators, including the $266,704 seized in January from the Seneca-Cayuga Tobacco Co.'s bank account.
Prosecutors also are seeking the forfeiture of a $550,000 airplane and four Peterbilt semi trucks they claim were purchased by nontribal Missouri conspirators with money derived from the illegal sale of untaxed cigarettes.
No criminal charges have yet been filed, but the investigation is continuing, Don Ledford, spokesman for the U.S. attorney's office in Kansas City, said early Wednesday afternoon.
In a late-breaking development, The Associated Press reported Wednesday evening that federal agents had raided the Wolf's Run Trading building on a Seneca Nation reservation in western New York and detained tobacco wholesaler William Parry. Parry and Wolf's Run Transport are among the subjects and persons of interest listed in the Kansas City court document.
While most of the investigation centers on companies and individuals outside Oklahoma, the Seneca-Cayuga Tobacco Co. wasn't the only Oklahoma connection mentioned in the forfeiture action.
Robert Bell of Blanchard “is believed to frequently traffic contraband (untaxed) cigarettes and other tobacco products from Missouri and Kansas to Oklahoma,” prosecutors wrote. “Law enforcement surveillance has observed Bell distributing cigarettes, believed to be trafficked from Missouri, throughout the Oklahoma City metropolitan area.”
Prosecutors said the Kansas State Highway Patrol stopped Bell and his girlfriend, Suzanne Ruby, on Nov. 17 while they were on their way to an undercover warehouse to purchase contraband cigarettes and seized $75,339 in currency, marijuana and a firearm.
A little over two months later, on Jan. 21, the Missouri State Highway Patrol stopped Bell and Ruby while they were on their way to the warehouse to purchase contraband cigarettes and seized an additional $82,601 in currency and a small amount of marijuana, prosecutors said.
Bell has an outstanding tax warrant in Oklahoma for more than $600,000 in delinquent cigarette taxes, records show. He could not be located for comment.
Federal agents with the Bureau of Alcohol, Tobacco, Firearms and Explosives initiated their investigation into contraband cigarette sales in December 2009 after discovering untaxed cigarettes were being sold at a Kansas City convenience store, court records show.
Agents reportedly traced the cigarettes to a Kansas City-area company called Cheap Tobacco Wholesale LLC. They then proceeded to conduct an elaborate investigation that involved intercepted cellphone calls, tracking devices and a series of transactions in which undercover officers sold suspects several million packs of untaxed cigarettes.
Prosecutors allege that Seneca-Cayuga Tobacco Co. helped broker and conceal the sale of contraband cigarettes to a Nebraska distributor and a New York smoke shop.
The Seneca-Cayuga Tobacco Co. profited by keeping a portion of the New York state sales taxes that were evaded, prosecutors claim in forfeiture documents.
Alan Beck, a longtime Oklahoma City tobacco wholesaler, said Wednesday that he is glad to see federal officials taking some action, but he believes they need to go further and lock up violators.
Beck has complained to the Oklahoma Tax Commission and other state officials for at least seven years that illegal tobacco sales in the state have been costing the state and legitimate wholesalers millions of dollars.
He estimates the sale of untaxed cigarettes by rogue distributors has been costing the state between $1 million and $2 million a month in lost tax revenues.
Undercover ATF operations have actually harmed legitimate wholesalers – at least in the short run – by helping flood the market with cheap, untaxed cigarettes, he said.
“I can't compete with the government,” he said. “It's amazing anyone legitimate is still in business.”
After reviewing the Kansas City forfeiture court filings, Beck said it did not appear to him that Oklahoma and other states have been receiving tobacco settlement funds from the millions of packs of cigarettes that government agents have been selling during their undercover operation.