Deal Over 'Bootleg' Cigarettes Announced

Tools

An Ohio trucking company has agreed to stop delivering untaxed cigarettes in New York state.

The agreement was announced late Tuesday afternoon by St. Lawrence County District Attorney Nicole Duve, along with Derek Champagne, the district attorney of Franklin County, and two district attorneys from downstate New York.

Tuesday's agreement began with the seizure of two truckloads of untaxed cigarettes in January and February of 2012.

Those two truckloads came from the Akwesane St. Regis reservation, according to investigators.

Although those two truckloads were not transported by R + L Carriers, the investigation into the untaxed cigarettes led officials to R + L. Investigators declined to say how one led to the other, because the investigation into bootlegged cigarettes continues and involves a grand jury.

R + L, based in Wilmington, Ohio, was described in the press release Tuesday as a trucking company that earns over a billion dollars a year.

The question of cigarettes sold from reservations has been politically fraught for years; on one side are grocery store owners who complain that untaxed cigarettes hurt their business, because the taxed cigarettes store owners sell are more expensive. State officials too have complained about the untaxed cigarettes, because the state doesn't get anything.

On the other side, native Americans, who assert the state has no right to tax products manufactured on their land. And consumers, of course, strongly favor the cheaper cigarettes from reservations. 

According to the press release, R + L "recognizes that New York law generally does not allow shipments of cigarettes to New York businesses that are not properly licensed or registered by the State, and does not allow shipments of cigarettes that do not bear New York State tax stamps."

“The bootlegging of contraband cigarettes is a major problem for State revenues and for public health, and it is gratifying to make some significant progress in enforcement,” Duve said in the statement.

The district attorneys have agreed not to bring any criminal prosecutions of R + L for its
role in the shipments under investigation if the company fully complies with the terms of the
agreement.

“There should be no confusion about illegal cigarette trafficking,” said Duvé. “The common carriers (trucking companies) are on notice that they have certain obligations. So are the traffickers, despite claims that there have been unclear policies in the past.

"It is clear enough today that you face enforcement if you distribute cigarettes in New York in violation of state and federal statutes, no matter what brand and no matter where manufactured.”

However, the law is not settled: a state Supreme Court judge in St. Lawrence County ruled last June that state police had no right to seize the untaxed cigarettes. That case is now on appeal.

In addition to adopting a sweeping set of compliance procedures. R + L has agreed to
cooperate with further investigations into illegal cigarette trafficking and to make $140,000 in
payments to the American Cancer Society and the American Lung Association for use in
counties in which R + L transported or delivered the cigarettes.

The full text of the press release

STATE OF NEW YORK, COUNTY OF ST. LAWRENCE
OFFICE OF DISTRICT ATTORNEY NICOLE DUVÉ
http://www.co.st-lawrence.ny.us/Departments/DistrictAttorney

FOR IMMEDIATE RELEASE:
September 24, 2013

INVESTIGATION ADVANCES ENFORCEMENT
AGAINST ILLEGAL CIGARETTE TRAFFICKING

Major Trucking Company Agrees to Adopt Robust Compliance Procedures

Four District Attorneys across New York State Join in Action

Today the St. Lawrence County District Attorney’s Office announced a ground-breaking
agreement with R + L Carriers, a large Ohio-based trucking company. The District Attorneys
who reached this agreement with R + L are Nicole Duvé of St. Lawrence County, Derek
Champagne of Franklin County, David Foley of Chautauqua County, and Thomas Spota of
Suffolk County.

The agreement resulted from an investigation of illegal cigarette trafficking that started after
two truckloads of untaxed cigarettes were seized in St. Lawrence County in early 2012. The
investigation revealed that an out-of-state company had been making massive shipments of
untaxed cigarettes to various locations in New York State, and that many of the shipments were
made through R + L Carriers of Wilmington, Ohio. As one of the largest “less-than-truckload”
(LTL) carriers in the United States, R + L annually earns over a billion dollars in revenue.
R + L has agreed to adopt significant new compliance measures to avoid further
involvement in transport of illegally shipped cigarettes. The company’s newly adopted cigarette
policy recognizes that New York law generally does not allow shipments of cigarettes to New
York businesses that are not properly licensed or registered by the State, and does not allow
shipments of cigarettes that do not bear New York State tax stamps. The policy applies equally
to “premium” and “native” brands of cigarettes, and it is backed up by a comprehensive set of
procedures to ensure that the policy is followed by the company and that any violations are
effectively addressed.

The District Attorneys have agreed not to bring any criminal prosecutions of R + L for its
role in the shipments under investigation if the company fully complies with the terms of the
agreement.

District Attorney Duvé said: “The bootlegging of contraband cigarettes is a major problem
for State revenues and for public health, and it is gratifying to make some significant progress in
enforcement.”

2
“Unfortunately, New York has an enormous black market for cigarettes which costs the state
billions of dollars in lost tax revenue,” said New York State Senator Tony Avella. “Black
market cigarettes also hurt law-abiding mom and pop stores and other small business throughout
New York by putting those who do pay taxes at a competitive disadvantage. That is why this
agreement is such a significant step towards curtailing black market cigarettes in New York and I
applaud all the District Attorneys involved for their efforts in reaching this important
agreement.”

“In cigarette trafficking there are often brazen violations,” noted District Attorney Spota.
“Traffickers sometimes claim that cigarettes are exempt from the laws if they are manufactured
on a reservation, or are being delivered from one reservation to another. There is no basis in the
law for such claims, and this agreement reflects that.”

Senator Charles Fuschillo, who sponsored the public health law prohibiting cigarette
deliveries to unregistered dealers, applauded the District Attorneys’ efforts to ensure compliance
with the law, stating: “Illegal cigarette sales harm law-abiding business owners by placing them
at a competitive disadvantage. They also steal substantial tax revenues from the State and local
governments, funds which taxpayers cannot afford to lose. Stopping illegal cigarette trafficking
will help level the playing field for our small businesses and prevent tax dollars from being lost
to fraud.”

District Attorney Foley stated: “Trucking companies need to be aware of the applicable
statutes. They don’t have to look the other way when their customers ship cigarettes. They can
adopt reasonable due diligence procedures to avoid carrying illegal shipments.”
District Attorney Champagne highlighted one of the legal requirements relevant to trucking
companies: “Deliveries within New York State may only be made to authorized recipients such
as licensed wholesalers and registered retailers. The Tax Department maintains a website that
allows anyone to check whether the party to whom cigarettes are to be delivered is properly
licensed or registered.”

“We applaud the initiative of District Attorneys Duvé, Spota, Champagne and Foley in
curtailing illegal shipment of untaxed cigarettes on New York highways,” said James Calvin,
President of the New York Association of Convenience Stores. “This agreement is a positive
step toward relieving New York’s cigarette tax evasion epidemic, which siphons business and
jobs away from law-abiding retailers while costing the State and Counties hundreds of millions
of dollars a year in lost tax revenue.”

“There should be no confusion about illegal cigarette trafficking,” said District Attorney
Duvé. “The common carriers are on notice that they have certain obligations. So are the
traffickers, despite claims that there have been unclear policies in the past. It is clear enough
today that you face enforcement if you distribute cigarettes in New York in violation of state and
federal statutes, no matter what brand and no matter where manufactured.”

In addition to adopting a sweeping set of compliance procedures. R + L has agreed to
cooperate with further investigations into illegal cigarette trafficking and to make $140,000 in
payments to the American Cancer Society and the American Lung Association for use in
counties in which R + L transported or delivered illegal loads of cigarettes.

3

Jeff Seyler, President & CEO of the American Lung Association of the Northeast stated:
“The dollars from this settlement will help to increase the availability of quality smoking
prevention and cessation programs in New York, like our Freedom From Smoking program, that
are effective in helping smokers quit. District Attorneys Champagne, Duvé, Foley and Spota
have our gratitude for promoting public health and for fighting the illegal trafficking of cigarettes
that is so harmful and widespread.” Dr. Alvaro Carrascal, Vice President of the American
Cancer Society, Eastern Division, said that “with these funds we’ll continue to educate the public
about the dangers of tobacco and provide resources that will aid smokers in their efforts to quit.”

“R + L is to be commended for adopting these ground-breaking compliance procedures,”
said District Attorney Duvé. “The procedures should protect against further incidents in which R
+ L customers are able to use the company for illegal shipments of cigarettes. We hope that
robust cigarette compliance procedures will become standard in the trucking industry.”

R + L Carriers is a freight shipping company that advertises nearly 50 years of service,
having grown from one truck to a fleet of nearly 13,000 tractors and trailers. It serves all 50
states plus Canada, Puerto Rico, the U.S. Virgin Islands, and the Dominican Republic, and has
received attention in college football post-seasons as the sponsor of the R + L Carriers New
Orleans Bowl. According to publicly available research on LTL carriers in North America, R +
L is the second largest that is privately owned and the eighth largest overall.

For their assistance in the investigation to date, District Attorney Duvé thanked the United
States Border Patrol, including Agents Daryl Zook and Matthew Miller; the New York State
Police, including Troopers Jason West and Jeremiah Strickland and Investigators Timothy Peets
and Jay Taylor; Suffolk County Assistant District Attorney Joseph Conley; and the New York
Department of Taxation and Finance, including Section Head Peter Spitzer, former Chief
Investigator John Connolly, Chief Investigator Christopher Lannon, Assistant Chief Investigator
Roy Marsh, and Supervising Investigator Davis Whelpley.

The investigation continues.

Wednesday, April 23, 2014
, Watertown, NY

On Demand

This content requires the latest Adobe Flash Player and a browser with JavaScript enabled. Click here for a free download of the latest Adobe Flash Player.

On Wall Street

What's On TonightFull Schedule