City Sues Reservation’s Cigarette Stores

By DAVID W. CHEN

Published: September 29, 2008

Plunging headfirst into a delicate issue that has long bedeviled New York State and Long Island’s Indian tribes, Mayor Michael R. Bloomberg criticized Gov. David A. Paterson on Monday for not enforcing cigarette tax laws, which the mayor estimated had deprived the city of up to $195 million a year in revenue.

Residents of Indian reservations — like the 50-acre Poospatuck reservation in Mastic — are entitled to buy cigarettes tax free for their own use.

But in a federal lawsuit filed on Monday, the Bloomberg administration accused eight stores on the reservation in Suffolk County of breaking state and federal law by selling cigarettes in bulk to bootleggers. The bootleggers, the lawsuit said, then shipped the cigarettes into the city.

At a news conference in City Hall, Mr. Bloomberg acknowledged that the practice had existed for years. But he said the city’s lawsuit, filed in Federal District Court in Brooklyn, would not have been necessary if the state had been enforcing the law.

Indeed, Mr. Bloomberg said, the state also would have benefited with $525 million a year in tax revenue.

“I think the governor should go to the reservations and say, ‘As of tomorrow morning, stop this practice,’ ” Mr. Bloomberg said. “And if it requires law enforcement, that’s what the governor has the State Police for — to enforce the law.”

To reinforce just how prevalent the practice was, Mr. Bloomberg stood next to a table stacked with packs of cigarettes and said that each of the 279 residents of the Poospatuck reservation — every man, woman and child — would have to smoke 960 packs, or 19,200 cigarettes, a day to account for the millions of cigarettes sold there in 2007.

The mayor framed the lawsuit in the context of the global financial crisis, noting that the city was trying to slice $500 million from this year’s budget, and was likely to propose raising property taxes by 7 percent to generate an additional $600 million starting in January. “This one step alone could go a long ways in closing our budget gap,” he said.

When asked about Mr. Bloomberg’s criticisms, Errol Cockfield, a spokesman for Mr. Paterson, said the governor was involved in discussions with the state’s Indian nations, those recognized by the state or the federal government, “to preclude the need for more endless litigation.”

Harry Wallace, who is a lawyer and the chief of the Unkechaug Indian Nation, which is on the Poospatuck reservation, said in a telephone interview that he had not heard about the lawsuit.

“Before we get a lawsuit, before we even get served, he serves the media first,” Mr. Wallace said of Mr. Bloomberg. “This debate has reached fanatical levels, where we are being scapegoated from everything from the fiscal crisis in New York to the mortgage crisis. I assume that at some point we’ll be blamed for global warming.”

The lawsuit is part of a broader strategy by Mr. Bloomberg to tackle cigarette bootlegging as well as reduce smoking in New York. Earlier this year, the city won a couple of legal victories: cigarette wholesalers were found potentially liable for violating a federal law, and the city was allowed to proceed with racketeering lawsuits against out-of-state Internet cigarette retailers.

The latest move seeks to go after cigarette retailers, but it could also entangle issues of Indian sovereignty, said Kathryn R. L. Rand, a law professor at the University of North Dakota who is an expert on Indian gambling.

“It has legal merit, but I think it’s pushing the envelope a little bit,” she said.

http://www.nytimes.com/2008/09/30/nyregion/30cigarettes.html?_r=1&scp=1&oref=slogin