Three North Idaho residents and two men from Western Washington are accused of money laundering and conspiring to traffic in contraband cigarettes in a federal indictment returned by a grand jury in Yakima.
The federal charges, carrying lengthy possible prison terms, are the outgrowth of an 18-month investigation into the shipments of millions of dollars in untaxed cigarettes to various locations on Washington state Indian reservations, authorities said Thursday.
Besides criminal charges, the indictment seeks forfeiture of $2.2 million in cash seized at Indian smoke shops and from bank accounts in Fairfield and Fife, Wash., and an estimated $1 million worth of cigarettes grabbed in May 2003 raids.
The case is believed to be the first time the Justice Department has brought criminal charges, at least in the Northwest, in the federal government’s ongoing battle to stem the sale of untaxed cigarettes to non-Indians. The sale of untaxed cigarettes to Indians is legal.
The illegal sale of untaxed cigarettes to non-Indians continues to cost the state of Washington millions in lost tax revenue, state and federal officials say.
The case leading to this indictment cost the state of Washington an estimated $7 million in lost tax revenue, the 238-count indictment says.
In the indictment, the U.S. government also seeks forfeiture of The Warpath, a landmark Indian smoke shop and convenience store on U.S. Highway 95 in Plummer, Idaho, on the Coeur d’Alene Indian Reservation.
The estimated value of the smoke shop is not listed in the indictment.
Named as defendants are Peter Mahoney, 51, and Peggy Mahoney, 35, both of Plummer, and Mark Van’t Hul, 41, of Worley, Idaho. They have unlisted telephone numbers and couldn’t be reached for comment.
Also indicted were Lyle W. Conway, 67, of Fife, and Lyle Shawn Conway, 32, of Tacoma.
They are each charged with conspiracy to traffic in contraband cigarettes, conspiracy to launder money and money laundering.
Dates and locations for their initial court appearances are expected to be set today.
“It’s a serious case, both from the point of alleged criminal conduct and lost tax revenue,” said Jim McDevitt, the U.S. attorney for the Eastern District of Washington.
“I’ve heard it estimated that, across the board and not just from this case, the state of Washington is losing as much as $1 million a month from the sale of untaxed cigarettes,” McDevitt said.
The federal law enforcement chief said the criminal prosecution is directed at specific individuals, not Indian tribes.
“We’re not at odds with the tribes, but individuals who allegedly have broken the law,” McDevitt said.
If the federal government’s case is successful and it ends up owning The Warpath, McDevitt said the privately owned property would be put up for sale just like houses, cars and other personal property seized in drug raids.
“The law allows us to seek the forfeiture of property that may be the fruit of criminal conduct,” the U.S. attorney said.
Assistant U.S. Attorney Jane Kirk, who is handling the case, said the grand jury indictment, returned Wednesday, was the result of a joint investigation begun in early 2003 by the IRS, ATF and the Washington State Liquor Control Board.
Kirk said although the indictment was returned in Yakima, the case could be assigned to a judge in Spokane because three of the defendants live in North Idaho.
The indictment says the alleged conspiracy began in September 2002 and continued through May 20, 2003, when a series of raids were carried out on the Coeur d’Alene Indian Reservation, the Yakama reservation and the Puyallup reservation near Fife, in Western Washington.
Peter and Peggy Mahoney and unindicted co-conspirator David Bean, doing business as the Indian Smoke Shop in Milton, Wash., on the Puyallup reservation, engaged in the unlawful transporting, possessing, selling and distributing of contraband cigarettes, the indictment alleges.
Frequently, unindicted conspirators named in indictments are individuals who are cooperating with the government in exchange for not being charged themselves.
The Mahoneys also are accused of engaging in similar alleged conduct with Lyle W. Conway, doing business as Lyle’s Smoke Shop in Fife, on the Puyallup reservation, and Lyle Shawn Conway, doing business at Lyle’s II, on that same reservation.
“It is further alleged that Peter Mahoney was an organizer, leader, manager and supervisor of the criminal activity of contraband cigarette trafficking that involved five or more participants,” the indictment says.
Court documents associated with the May 2003 raids show that two Spokane-area wholesale suppliers, Burke’s Distributing and Black Sheep Distributing, sold $36.2 million worth of cigarettes to JKL Enterprises and its owner, Louis Mahoney, of Plummer.
He has not been charged criminally.
Kirk would not disclose the nature of the relationship, if any, between Louis Mahoney and his business and Peter and Peggy Mahoney.