A federal grand jury returned a 58-count money-laundering indictment Thursday, seeking $84 million from two Spokane wholesalers accused of supplying untaxed cigarettes to Coeur d’Alene tribal businesses who smuggled them back into Washington.
Named in the indictment are L.A. Nelson Co., doing business as Burke’s Distributing, and its owners, Douglas E. Burke, 51, and Brandon E. Donahue, 34; and Black Sheep Distributing Inc., and its owner, Brian T. Donahue, 30, all of Spokane.
The indictment alleges the Spokane wholesale companies sold at least 4 million cartons of untaxed cigarettes to the Coeur d’Alene smoke shops, which in turn shipped the cigarettes to retail outlets in Washington.
“This is a significant case – that’s obvious by the amount of money involved,” U.S. Attorney Jim McDevitt said Thursday afternoon when contacted by cell phone while returning to Spokane from Yakima where the grand jury indictment was returned.
Spokane attorneys David Groesbeck and Carl Oreskovich, representing the wholesale distributors and their owners, said the businesses did nothing wrong and will vigorously defend themselves against the charges.
The indictment accuses the defendants of three conspiracy counts; 12 counts of trafficking in contraband cigarettes; 12 counts of record-keeping violations; 27 counts of money laundering and four counts of counterfeit goods trafficking.
Also charged in the indictment are Joseph D. Dunsmoor, 30, of Spokane; Marianne Willard, 55, of Plummer, Idaho; and Mitchell Sivina, 36, of Miami, Fla.
The new indictment is the latest development in a state and federal investigation that started with a series of raids on smoke shops on the Coeur d’Alene Indian Reservation in 2003.
Those raids led to guilty pleas from eight defendants involved in a conspiracy to smuggle millions of dollars of untaxed cigarettes from smoke shops on the Coeur d’Alene reservation to 12 locations on Washington state Indian reservations where they were sold without tax stamps to non-Indians at cheaper-than-retail prices.
As part of plea bargains, it is likely that some or all of those defendants agreed to cooperate with state and federal investigators in building the new case against the Spokane wholesale businesses that supplied the cigarettes.
The conspiracy between 1999 and 2003 cost the state of Washington an estimated $23 million in lost taxes.
The indictment seeks a $78 million judgment against L.A. Nelson Co. – doing business as Burke’s Distributing – Douglas Burke and Brandon Donahue and forfeiture of the company’s warehouse, located at 910 N. Nelson.
Burke said “none” when asked if he had any comment about being named in the criminal indictment.
It also seeks a $5 million judgment against Black Sheep Inc. and its sole owner, Brian T. Donahue, and a $30,420 judgment against Mitchell Sivina. Black Sheep’s business is located in leased space at 2914 E. Boone.
The indictment also seeks forfeiture of $384,240 obtained from the sale of almost 12 million contraband cigarettes seized by federal and state agents in May 2003 in Plummer, Idaho; $399,000 in U.S. currency seized from a bank account and another $500,000 seized in Plummer.
Groesbeck said his client, Burke’s Distributing, has been in business as a wholesale cigarette distributor in Spokane for 40 years.
“Over those years, the company has sold cigarettes to many wholesale distributors and retailers and businesses operating on Indian reservations,” Groesbeck said.
“The company has always complied with federal, state and local laws and followed the spirit and the letter of the law.”
The state Department of Revenue, in prior legal proceedings, “has confirmed that Burke’s Distributing has always had an exemplary record and passed every department audit in the company’s 40 years of existence,” the company’s attorney said.
“When Burke’s Distributing had questions or concerns pertaining to the sale of cigarettes to Indian tribes and retail outlets on reservation, the company has always followed Department of Revenue instructions and advice,” Groesbeck said.
“The company complied in this instance, too, and got specific instructions that it was perfectly legal to sell wholesale cigarettes to tribal businesses on the Coeur d’Alene reservation,” he said.
“Burke’s Distributing and Mr. Doug Burke will vigorously defend this case and will prove their innocence,” Groesbeck said.
Oreskovich, representing Black Sheep and its owner, Brian T. Donahue, offered a similar response.
“It is unfortunate that the government has chosen to turn what it previously recognized as a civil case now into a criminal proceeding,” Oreskovich said.
“However, we will play the cards we are dealt and take the government to task in the courtroom.”