April 23, 2007 in City

Pleas bring cigarette smuggling case to end

By The Spokesman-Review
 

By the numbers

•The smuggling operation between 1999 and May 2003 cost the state of Washington an estimated $56 million in lost taxes.

•A special task force seized $5.1 million in cash and more than 200,000 cartons of cigarettes.

Federal prosecutors are wrapping up – without going to trial – an investigation of eight people accused of smuggling millions of dollars worth of cigarettes from North Idaho to tribal smoke shops in Western Washington.

A trial date was canceled Friday with guilty pleas from four final defendants, including accused ringleader Louie Mahoney, of Plummer, Idaho.

The latest guilty pleas came eight months after at least three defendants from Western Washington cut plea-bargain deals with federal prosecutors and agreed to testify against Mahoney and other co-conspirators living in North Idaho, court documents reveal.

The smuggling operation between 1999 and May 2003 cost the state of Washington an estimated $56 million in lost taxes, according to Jim McDevitt, the U.S. attorney for the Eastern District of Washington.

As part of the investigation and an earlier companion case involving six other defendants, a special task force seized $5.1 million in cash and more than 200,000 cartons of cigarettes.

Defendants in both cases agreed to forfeit the cash and cigarettes to the federal government as a condition of their plea agreements.

The “central conduit” of the conspiracy, court documents say, was Louie Mahoney, who ran the multimillion-dollar-a-year contraband cigarette trafficking organization from his home in Plummer, on the Coeur d’Alene Indian Reservation.

Mahoney’s criminal enterprise engaged in shipping, transporting, receiving, possessing, selling, distributing and purchasing contraband cigarettes, court documents say.

He and co-conspirators also were involved in laundering the proceeds from the contraband cigarette sales, mail fraud, interstate transportation in aid of racketeering and cigarette record-keeping violations.

Mahoney did not have a Coeur d’Alene tribal license to sell tobacco products, court documents say.

Doing business as JKL Enterprises, Mahoney ordered untaxed cigarettes from wholesale suppliers in Spokane and elsewhere, using two retail stores owned by relatives on the Coeur d’Alene reservations as fronts.

The cigarettes and other tobacco products actually would be delivered to Mahoney’s home on U.S. Highway 95, near Plummer, the documents say, before being shipped to a dozen tribal smoke shops in Western Washington.

There, business was brisk because nontribal customers could buy the cigarettes without paying the $14.25-per-carton state tax. In Washington, cigarettes must bear either tax-paid stamps or tax-exempt stamps.

Mahoney, 61, and his two sisters, Margaret R. Jose, 61, and Christine Mahoney-Meyer, both of Plummer, pleaded guilty Friday in U.S. District Court in Yakima to conspiracy to violate the Racketeer Influenced and Corrupt Organizations (RICO) Act.

Roger Fiander, 67, of Wapato, Wash., also pleaded guilty to conspiring to violate the federal anti-racketeering law.

In accepting the latest guilty pleas, U.S. District Court Judge Robert Whaley ordered background reports on the four defendants and scheduled sentencing for Aug. 28 in Yakima. They are free on bonds or other conditions until sentencing.

Written plea agreements signed by the defendants and approved by the court were not filed immediately as public documents.

Their guilty pleas came after earlier guilty pleas from four other defendants indicted in the same case – Gerald G. George, Lyle W. Conway, both of Fife, Wash., Lyle Shawn Conway, of Tacoma, and Kathleen S. Mahoney, of Walla Walla.

All four of those defendants also pleaded guilty to conspiring to violate the federal anti-racketeering law and are awaiting sentencing this summer.

Unindicted co-conspirators in the case were identified as David Bean, John Hunter, Harvey L. Davis and these businesses: JKL Enterprises; Fiander Enterprises; Lil’ Brown Smoke Shack; Goodman Road Smoke Shop; Lyle’s Smoke Shop; Lyle’s II Smoke Shop; Indian Smoke Shop; Jerry’s Smoke Shop; 2 Yay Yays and Chrissy’s Corner.

Separate plea agreements signed by Kathleen S. Mahoney, Lyle Shawn Conway and Gerald G. George were filed as court documents, offering details of the investigation.

In particular, the guilty plea from Kathleen Mahoney last September appears to have been a pivotal point in getting last Friday’s guilty pleas from the other four remaining defendants.

As part of her plea bargain, the insider described to investigators how the smuggling conspiracy worked. Her relationship with Louie Mahoney, if any, is not described in court documents.

She was involved in the day-to-day operations of Louie Mahoney’s JKL Enterprises, based in his home. She received orders from Washington tribal retailers, ordered cigarettes from wholesalers and issued checks to the wholesalers for the cost of the contraband cigarettes, her plea agreement says.

“The cigarettes being distributed were contraband in the state of Washington because the cigarettes did not bear the applicable state tax stamps and transportation of the cigarettes was not reported to the state of Washington,” it says.

Invoices for cigarettes delivered to JKL Enterprises at Mahoney’s home indicated the shipments went to 2 Yay Yays Market, a retail business in Worley, Idaho, and Chrissy’s Corner, another retail store in nearby Plummer.

The state of Idaho requires the shipper to maintain a duplicate invoice, showing complete details of the sale, including the name and address of the purchaser.

“Within a day of the delivery from distributors, employees or drivers for the Western Washington Indian retailers would drive to JKL Enterprises in Plummer and pick up the (contraband) cigarettes,” the document said. Payment was required in advance either by cash, check or a bank deposit.

JKL Enterprises’ employees would help load the contraband smokes, “making sure that the cigarettes were not visible from outside the vehicles.”

“The cigarettes were hidden so that if the vehicle was stopped by law enforcement in Washington, the contraband cigarettes would not be observed and seized,” the document says.

If Mahoney or other JKL Enterprises’ employees believed Washington State Liquor Control Board agents were watching Mahoney’s home or roads from Idaho into Washington, shipments of contraband cigarettes would be delayed.

The investigation was conducted by agents from the Liquor Board, the Internal Revenue Service and the Bureau of Alcohol, Tobacco, Firearms & Explosives.


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