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AG suing Indian cigarette dealers

The office of Attorney General Eric T. Schneiderman on Monday filed a lawsuit against two companies for illegally selling contraband cigarettes without paying the required state excise taxes.

The lawsuit, which is the result of an ongoing investigation into contraband cigarette sales across the state, was filed in U.S. District Court for the Eastern District of New York against Grand River Enterprises based on Six Nations land in Ohsweken, Ontario, Canada, and its wholesaler, Native Wholesale Supply, located in Perrysburg, Cattaraugus County.

The lawsuit alleges Grand River Enterprises avoided state taxes by illegally selling its products to Native Wholesale Supply instead of a New York state licensed stamping agent who would prepay the New York state cigarette excise tax and affix the state tax stamp, as required under the law.

From November 2011 to July 2012, it is alleged Native Wholesale Supply paid $85 million to Grand River Enterprises for its cigarettes, which accounts for more than three million cartons of cigarettes and a potential tax loss to the state of more than $13.2 million. Under federal law, Grand River Enterprises could face a civil penalty of up to two percent of the gross sales of cigarettes for the year. Based on 2011-2012 sales, the company’s civil penalty could be tens of millions of dollars.

On Jan. 16, as part of Schneiderman’s investigation, federal agents raided the Skydancer smoke shop in Seneca Falls where they seized, among other items, more than 16,230 cartons of unstamped Seneca brand cigarettes. With 10 packs in each carton, and 20 cigarettes in each pack, ATF agents seized over 3 million contraband Seneca brand cigarettes at that one location.