Eight people, including four from Plummer, Idaho, are named in an 88-count federal racketeering indictment returned Wednesday as part of a four-year investigation into the sales of contraband cigarettes.
The tax loss to the state of Washington associated with the case is more than $56 million, said Jim McDevitt, the U.S. attorney for the Eastern District of Washington.
As part of the case, investigators already have seized $3.1 million in cash, another $2 million in bank accounts and more than 200,000 cartons of cigarettes.
The umbrella racketeering charge encompasses various alleged crimes, including money laundering, mail fraud and trafficking in contraband cigarettes.
Named in the indictment are Louie Mahoney, 56; Kathleen Mahoney, Christine Mahoney-Meyer, 53, and Margaret R. Jose, 60, all of Plummer.
Also charged were Lyle W. Conway Sr., 68, and Lyle Shawn Conway Jr., 32, both of Fife, Wash.; Gerald G. George, 58, of Tacoma; and Roger Fiander, 66, of Wapato, Wash.
“In this investigation, individuals located on the Coeur d’Alene Indian Reservation in northern Idaho sold millions of cartons of contraband cigarettes to smoke shops located on Indian reservations within the state of Washington,” said a prepared statement released by the U.S. attorney’s office.
During the period of time covered by the indictment, July 1999 to May 2003, the Washington state tax per carton of cigarettes increased from $8.25 to $14.25.
The state of Washington has a provision for tribal smoke shops to sell tax-exempt stamped cigarettes to their tribal members, authorities said. But cigarettes sold by tribal smoke shops to nontribal members are to be taxed at the full rate.
In 2001, the state of Washington initiated a program “to equalize the commerce playing field between tribal and nontribal retailers” selling cigarettes, authorities said.
Tribes can voluntarily enter into a compact with the state, agreeing to collect a tax equal to the state cigarette tax. Authorities said the difference is that the tax collected by tribal retailers is returned to the tribes for essential services.
Tribes that do not have a compact with the state must charge the state tax to nontribal members who buy cigarettes at tribal smoke shops.
“Enforcement of this type of crime is important to make a fair playing field for the nontribal retailers, to protect state revenue and to take money out of the hands of criminals and put it into the tribes’ hands through the compact contracts,” McDevitt said.
The investigation revealed that nontribal customers were avoiding paying the $14.25-per-carton state tax by buying cigarettes from tribal smoke shops.
Once the untaxed cigarettes were transported from the Coeur d’Alene Reservation to smoke shops in Western Washington, state officials said they could not conduct enforcement activities.
“The smoke shops located on reservations could charge a price just short of what off-reservations shops had to charge for legal (taxed) cartons, resulting in millions of dollars in profits for individual Indian smoke shops,” the statement said.
The investigation was conducted by agents from the Internal Revenue Service, the Bureau of Alcohol, Tobacco, Firearms and Explosives, and the Washington State Liquor Control Board.
If convicted, the defendants could face up to 20 years in prison, fines up to $500,000 and a monetary judgment totaling approximately $93 million, authorities said.