From: Times Union
James M. OdatoIn this Aug. 23, 2010 photo, customers shop at a smoke shop on the Tonawanda Seneca Nation reservation in New York. New York’s latest attempt to tax lucrative Native American smokeshop sales to non-Indian customers has generated mountains of legal briefs, hours of argument and a seemingly constant flurry of court decisions. (AP Photo/David Duprey)
On July 6, 2011, Deputy Commissioner of Tax Enforcement Richard Ernst emailed a memo titled “Cigarette Enforcement” to investigators in the state Tax Department — but state lawyers don’t want him testifying about it.
The memo, entered into a criminal case file in St. Lawrence County, states that the tax department should refrain from seizing untaxed Native American cigarette shipments, particularly when they are moving from one reservation to another.
Copies of the memo, outlining “when we could seize and/or charge,” have been found in tractor-trailer cabs of transporters of Native-made cigarettes, held by drivers like a passport to show any law enforcement officials who stop and check loads, according to lawyers.
But for some reason Ernst, whose memo has circulated in Indian Country for a year, is being blocked from testifying in a case involving a 25-year-old Mohawk man charged with felony possession of more than a million Mohawk-made, untaxed cigarettes. Andrew Laughing was transporting the cigarettes to his uncle’s store on the Tonawanda Seneca Reservation in western New York in June 2011 when he was arrested and had his load seized.
Since then, his lawyer Daniel Pease has been trying to get his subpoena of Ernst and of State Police Capt. Robert LaFountain honored so that he can ask questions about the memo, and whether State Police are abiding by its directives.
On June 4, lawyer Steven Krantz of the Office of Tax Enforcement and a State Police lawyer argued to quash the subpoenas. They lost their pitch before St. Lawrence County Judge Jerome J. Richards, and Ernst was scheduled to testify in the Laughing case Aug. 7. But on July 27, Krantz called for a postponement because the Attorney General’s Office is going to appeal Richards’ decision to compel Ernst’s testimony.
A tax department spokesman would not say why his agency won’t let Ernst explain his memo. Krantz told Richards that Ernst’s memo should be interpreted as guidelines, not rules, and were meant only for tax investigators.
“The purpose was to give them some default guidelines if they couldn’t reach a senior to talk about a particular case,” Krantz wrote in his argument, “and certainly didn’t constitute a legal judgment about the legality or illegality or taxability or non-taxability, much less a direct direction to the State Police or district attorney or anybody else.”
Pease said he suspects state officials do not want tax enforcement policy on trial, and called the appeal unusual in the middle of a criminal case. He pointed out that State Police in western New York did not seize a similar shipment of cigarettes after checking with the tax department first.
Krantz said in his oral argument that cigarette smuggling is a massive problem and that “inconsistencies in law enforcement from place to place, time to time, agency to agency are not exceptional.”
Laughing faces a sentence of four to seven years in prison. The district attorney’s office calculates lost taxes from the cigarettes he hauled total $248,000, and compared the alleged activity to stealing from those who abide by the law. “The defendant’s crime feeds into a larger tax evasion enterprise, that totals approximately $110 million annually,” the prosecutor told the court.