March 29, 2006

Gristede's Sues Long Island Tribes

New York Supermarket chain Gristede's Foods, Inc. is suing the Shinnecock Indian Nation in Southampton and the Unkechauga Nation on the Poospatuck Reservation in Mastic, for lost revenue resulting from the tribes' illegal cigarette sales. Estimated damages are believed to be $20 million.

The suit alleges that "the illegal trade in these discounted Indian-sold cigarettes has spawned, with the defendants' knowledge and active participation, a thriving black market of discount cigarette sales that funds gangs, organized crime and international terrorist groups such as Hezbollah, and which promotes juvenile and teen smoking."

Gristedes is asking for an injunction against cigarette sales on the reservations, punitive damages, and a portion of the profits from the cigarette sales.

The suit charges that the tribes obtain cigarettes not only from licensed manufacturers, distributors and wholesalers but also from smugglers who purchase cigarettes in states with low excise taxes, such as Virginia or illegally import cigarettes from overseas.

Shinnecock Tribal Trustee and smoke shop owner Lance Gumbs believes this action is to curry political favors from New York State Attorney General and gubernatorial candidate, Eliot Spitzer.

"The CEO of Gristede's is one of Spitzer's biggest supporters," said Gumbs, referring to John Catsimatidis. "This is to gain political favors with Spitzer." According to the state's Board of Elections' financial disclosure report, Catsimatidis has donated at least $3,597.27 to Spitzer's campaign.

Spitzer has been warning tribes that the law requiring state taxes on cigarettes sold from reservations is in effect.

However, the state Department of Taxation and Finance appeared to send a conflicting message when it notified a major cigarette wholesaler in March that it could ignore the law. Tobacco shipments resumed on March 17. Since then, Spitzer has warned the wholesaler that if its continued disregard for the law could result in prosecution.

Gumbs said business on the Shinnecock reservation has "plummeted" since Spitzer's probing. He has cut his employees down to 20 hours a week. "Business is horrendous," he said.

According to a recent Zogby International Poll, 65% of New Yorkers disagree that the state should begin to attempt to collect sales taxes on items sold on Indian reservations, although only 15% of those polled report actually having purchased cigarettes on an Indian reservation. Just one in four (24%) say they have purchased gas on a reservation.

"It's clear that New Yorkers believe that the government entities should not mess with the tribes and leave them to do their own economic endeavors," said Gumbs.

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