Source: http://ny.findacase.com/research/wfrmDocViewer.aspx/xq/fac.20090206_0000068.ENY.htm/qx
Timestamp: 2018-04-27 08:10:31
Document Index: 216281089

Matched Legal Cases: ['§ 1962', '§ 1962', '§ 844', '§ 844', '§ 894', '§ 894', '§ 844', '§ 922', '§ 922', '§ 1958', '§ 1958', '§ 2342', '§ 2341', '§ 471', '§ 471', '§ 471', '§ 471', '§ 336', '§ 471', '§ 471', '§ 471', '§ 471', '§ 471', '§ 471', '§ 471', '§ 471', '§ 471', '§ 471', '§ 471', '§ 471', '§ 471', '§ 471', '§ 1814', '§ 471', '§ 471', '§ 471', '§ 471', '§ 471', '§ 471', '§ 471', '§ 471', '§ 471']

On July 11, 2006, the government filed the indictment charging defendant, a cigarette on-reservation retailer,*fn1 with eleven counts, to wit: (1) Count One (conducting and participating in the affairs of an enterprise in violation of the Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. § 1962(c) ("substantive RICO count")); (2) Count Two (racketeering conspiracy in violation of 18 U.S.C. § 1962(d) ("RICO conspiracy")); (3) Count Three (arson conspiracy in violation of 18 U.S.C. § 844(i)); (4) Count Four (arson in violation of 18 U.S.C. §§ 844(i) and 2); (5) Count Five (conspiracy to use extortionate means to punish nonrepayment of credit in violation of 18 U.S.C. § 894(a)(2)); (6) Count Six (extortionate punishment for nonrepayment of credit in violation of 18 U.S.C. §§ 894(a)(2) and 2); (7) Count Seven (use of fire to commit a felony in violation of 18 U.S.C. §§ 844(h)(1) and 2); (8) Count Eight (illegal possession of a firearm by a convicted felon in violation of 18 U.S.C. § 922(g)(1)); (9) Count Nine (illegal possession of a firearm by a convicted felon in violation of 18 U.S.C. § 922(g)(1)); (10) Count Ten (conspiracy to use interstate facilities in the commission of murder for hire in violation of 18 U.S.C. § 1958); and (11) Count Eleven (use of interstate facilities in the commission of murder for hire in violation of 18 U.S.C. §§ 1958 and 2).
18 U.S.C. § 2342(a). Contraband cigarettes are defined in § 2341 as follows: a quantity in excess of 60,000[*fn2 ] cigarettes, which bear no evidence of the payment of applicable State or local cigarette taxes in the State or locality where such cigarettes are found, if the State or local government requires a stamp, impression, or other indication to be placed on packages or other containers of cigarettes to evidence payment of cigarette taxes, and which are in the possession of any person other than [setting forth exempted persons]
With regard to all cigarettes the state has power to tax, including cigarettes sold on-reservation to non-Native Americans, § 471(2) sets forth a mechanism for the collection of the tax whereby a state licensed stamping agent is required to advance the amount of the tax by purchasing adhesive stamps from the state and affixing them to each package of cigarettes. N.Y.
Tax Law § 471(2).*fn3 The stamping agent then adds the amount of the tax to the price of the cigarettes sold to its customers, which is passed along the chain of distribution to the consumer. Thus, § 471(2) provides that "the ultimate incidence of and liability for the tax shall be upon the consumer." Id. § 471(2).
In 1988, the New York Department of Taxation and
Finance (the "DTF") determined that large volumes of unstamped cigarettes were being purchased by non-Native Americans from reservation retailers. Department of Taxation and Finance of N.Y. v. Milhelm Attea & Bros., Inc., 512 U.S. 61, 64-65 (1994). Because unlawful purchases of unstamped cigarettes deprived New York of substantial tax revenues, the DTF adopted regulations, 22 NYCRR §§ 336 et seq., for the enforcement of the collection of taxes from non-Native American purchasers of cigarettes from on-reservation retailers. Id. at 65; see also N.Y. Assoc. of Convenience Stores v. Urbach, 646 N.Y.S.2d 918, 921 (Sup. Ct. Albany County 1996). The regulations recognized the right of exempt Native American consumers to purchase untaxed cigarettes on the reservation. However, "[t]o ensure that nonexempt purchasers do not likewise escape taxation, the regulations limit[ed] the quantity of untaxed cigarettes that wholesalers may sell to tribes and tribal retailers." Milhelm, 512 U.S. at 65. "To prevent non-Indians from escaping the tax, [the] regulatory scheme . . . impose[d] record keeping requirements and quantity limitations on cigarette wholesalers who sell untaxed cigarettes to reservation Indians." Id. at 64. Under the regulations, "[r]etailers were to keep accurate records of those to whom they sold untaxed cigarettes and submit these records to the [DTF]." Warren v. Pataki, No. 01-CV-0004E, 2002 WL 450056, at *1 (W.D.N.Y. Jan. 9, 2002).
According to evidence adduced at trial, in February 1996, Governor Pataki announced his intention to begin enforcement of the regulations and formally notified the tribes that they had 120 days to comply, or prepare to comply, with the regulations. (Tr. at 11087.)*fn4 However, the following year, in May 1997, Governor Pataki did an about-face and directed the repeal of the regulations and proposed legislation that would allow on-reservation stores to sell tax-free cigarettes. Santa Fe Natural Tobacco Co. v. Spitzer, No. 00 CIV. 7274, 00 CIV. 7750, 2001 WL 636441 (S.D.N.Y. June 8, 2001), rev'd on other grounds, 320 F.3d 200 (2d Cir. 2003). The regulations were repealed by the DTF on April 28, 1998. New York Assoc. of Convenience Stores v. Urbach, 92 N.Y.2d 204, 214 (1998). Although Governor Pataki sent to the legislature a bill that would amend the State Tax Law to allow reservation stores to sell tax-free cigarettes, the proposed amendments never passed. Nonetheless, the State's policy of non-enforcement or "forbearance" continued.
By bench decision dated October 9, 2007, the Court denied defendant's motion, finding, inter alia, that "what the state requires[] is determined by the statutes enacted by the legislative body." (Oct. 9, 2007 Tr. at 57.)*fn5 In denying defendant's motion, the Court indicated that it had decided the motion "on the issues as framed in the motion papers" and that it would be amenable to revisiting defendant's application on new grounds, including a potential substantive due process violation. (Oct. 9, 2007 Tr. at 63.)
On May 1, 2008, the jury found that the government had proved Racketeering Acts Five through Eighty (the "CCTA Racketeering Acts")*fn6 and found defendant guilty of Count Two, RICO conspiracy based on the CCTA Racketeering Acts.*fn7 The jury also found defendant guilty of illegal possession of the firearm as alleged in Count Eight. During the second part of the bifurcated trial as to that charge, the jury found that defendant was a prior felon on May 5, 2008. Defendant was found not guilty on all remaining counts, as well as on Racketeering Acts One through Three.
Upon finding that the government had proved that defendant conspired to commit Racketeering Acts Five through Eighty under the Count Two RICO conspiracy charge, the jury returned a guilty verdict as to that count. Defendant advances three primary arguments in support of his motion to dismiss Count Two: (1) "[New York] Tax Law § 471 neither authorizes, requires,
[n]or permits the collection of taxes on cigarettes sold on Indian reservations absent implementing regulations, and § 471 therefore cannot support a CCTA prosecution"; (2) "[t]his criminal RICO conspiracy prosecution of a New York Indian retailer under the CCTA for on-reservation sales deprived . . . Morrison of substantive due process"; and (3) "[t]he CCTA racketeering acts incorporated into Count Two -- and therefore Count Two itself -- should be dismissed for the same reason the Court dismissed these same acts as charged in Count One, i.e. insufficient evidence to prove the government's theory of prosecution, that . . . Morrison aided and abetted off-reservation cigarette sales in violation of the CCTA." (Def.'s Mem. of Law in Supp. at i - ii.) The Court will address defendant's arguments seriatim.
By instant motion, defendant attempts yet once again to have another bite at the apple, arguing that the recent decision of the Fourth Department affirming the lower court's holding in Day Wholesale*fn8 "lends substantial support to [his] argument and demonstrates that absent the necessary implementing regulations there simply are no 'applicable' taxes -- i.e., taxes that are 'capable of being applied' -- concerning on-reservation cigarette sales." (Def.'s Mem. of Law in Supp. at 7.) Defendant also relies on Milhelm Attea, 512 U.S. 61, a case also previously addressed by the Court, albeit briefly. In response, the government simply indicates that "there is nothing 'new' about th[e Day Wholesale] decision or any legal opinion that would alter this Court's previous rulings." (Gov't's Mem. in Opp'n at 22.)
2. The CCTA and the New York Tax Law Before examining Day Wholesale and Milhelm
Attea, it is helpful to briefly review the general framework of the CCTA and the New York State Tax Law. It is also helpful to note that the racketeering acts at issue occurred from May 2, 2003 to August 2, 2004.
Section 471(1) of the New York Tax Law provides that "[t]here is hereby imposed and shall be paid a tax on all cigarettes possessed in the state by any person for sale, except that no tax shall be imposed on cigarettes sold under such circumstances that this state is without power to impose such tax . . . ." N.Y. Tax Law § 471(1). It is undisputed that federal law forbids the collection of these taxes on cigarettes sold on Native American reservations to enrolled tribal members for their personal consumption, see Moe, 425 U.S. 463, but that taxes may be collected on cigarette sales made on the reservation to non- Native American consumers, see Confederated Tribes of Colville Indians Reservation, 447 U.S. 134.
Id. § 471-e (2003). This version of § 471-e, which was effective until February 28, 2006, was contemporaneously in effect with all but three of the CCTA Racketeering Acts presented to the jury in this case (Racketeering Acts Eight through Eighty). The other three, Racketeering Acts Five through Seven, occurred prior to the enactment of § 471-e. However, neither party claims that this version of § 471-e, which pertains solely to non-Native American purchasers acquiring cigarettes for their "own consumption," governs the instant CCTA prosecution.*fn9
The amended version of § 471-e provides that "all cigarettes sold on an Indian reservation to non-members of the nation or tribe or to non-Indians shall be taxed, and evidence of such tax will be by means of an affixed tax stamp." Id. § 471- e(1)(a) (2006). It further provides that "[q]ualified Indians may purchase cigarettes from a reservation cigarette seller exempt from the cigarette tax even though such cigarettes will have an affixed cigarette tax stamp." Id. § 471-e(1)(b). This is achieved through a tax exemption coupon system, spelled out in the amended version of the statute, which is discussed in more detail below.
Day Wholesale and its analysis of the amended version of § 471-e are distinguishable from the instant case, which is governed by § 471. "The plain, mandatory phrasing of [§ 471] sets forth a requirement that stamping agents affix tax stamps to all cigarettes the state has the power to tax, which includes those sold by reservation retailers for re-sale to the public." City of N.Y. v. Milhelm Attea & Bros., Inc., 550 F. Supp. 2d 332, 346 (E.D.N.Y. 2008) (Amon, J.). There is nothing in the language of § 471 which even remotely suggests that the statutory liability set forth therein does not attach absent regulations designed to facilitate collection of these taxes on the reservation. Cf. Cayuga Indian Nation of N.Y. v. Gould, No. 2008-16350, 2008 WL 5158093, at *5 (Sup. Ct. Monroe County Dec. 9, 2008) ("Inasmuch as the tax liability referred to in § 1814*fn10 springs from § 471, the fact that recently enacted § 471-e has been judicially declared by Day Wholesale to be 'not in effect' is of no moment."). Defendant concedes as much when he states that "[a]lthough the State Legislature did not state in haec verba that regulations must be implemented in order for reservation retailers to be obliged, under § 471, to sell only tax-stamped cigarettes to non-exempt persons, the absence of any purely statutory mechanism to achieve this end within this narrow and politically sensitive area confirms that the promulgation of regulations was essential -- rather than merely expedient -- for taxes to be imposed on sales at Indian smoke shops." (Def.'s Mem. of Law in Supp. at 13 (emphasis added).)
This act shall take effect April 1, 2002; provided, however, if this act shall become a law after such date it shall take effect immediately and shall be deemed to have been in full force and effect on and after April 1, 2002; . . . provided further that sections thirty, thirty-one and thirty-three of this act[*fn11 ]shall take effect April 3, 2002 and shall apply to all cigarettes possessed in the state by any person for sale and use in the state by any person on and after April 3, 2002 and to taxes, interest and penalties collected or received by the commissioner of taxation and finance under sections 471 and 471-a of the tax law on and after such date; provided, however, that the commissioner of taxation and finance shall be authorized on and after this act shall have become a law to take steps necessary to implement these provisions on their effective date . . . .
Moreover, the fact that the Notes authorize the DTF to "take steps necessary to implement" this section "on and after this act shall have become a law" does not warrant a different conclusion. Although there were no regulations in place to enforce the collection of the taxes due for on-reservation cigarette sales at the time of the racketeering acts alleged in the indictment, defendant could have easily complied with § 471 by simply purchasing stamped cigarettes from a state licensed wholesaler/stamping agent in the amount necessary to cover his reservation sales to non-Native Americans.*fn12 At the same time, defendant could have purchased unstamped cigarettes consistent with his standard practice, but in such lesser amount as he deemed necessary to serve the needs of Native Americans on the reservation for their own personal consumption. The lack of implementing regulations does not negate the obligation of individuals such as Morrison to sell only stamped cigarettes to non-Native American purchasers but rather implicates the ability of the state to collect the tax from Native American tribes, which have repeatedly flouted state attempts at collection. As explained by the Third Department in Urbach and as noted earlier:
Additionally, the [DTF] cannot compel the retailers to attend audits off the reservations or compel production of their books and records for the purpose of assessing taxes. In that regard, representatives of the [DTF] engaged in extensive negotiations with the tribes in an effort to arrive at an acceptable agreement. Those efforts were largely unsuccessful and the vast majority of the Indian retailers refused to register with the [DTF]. In further efforts to enforce the statute, the State attempted interdiction, i.e., interception of tobacco and motor fuel shipments and seizure of those shipments that were found to be in noncompliance with the Tax Law. That strategy resulted in civil unrest, personal injuries and significant interference with public transportation on the State highways. 712 N.Y.S.2d at 222. Essentially, defendant's argument boils down to the claim that because Native Americans, such as Morrison, have successfully thwarted enforcement of § 471, the statute is inoperative until the DTF can figure out a way to compel compliance. The Court rejects this proposition.
Although the facts in the Second Circuit's decision in Kaid are distinguishable,*fn13 the following passage is instructive for present purposes:
In sum, the Day Wholesale decision only addressed whether or not the specific collection mechanism set forth in the amended version of § 471-e, which statute does not even apply to the present prosecution, could operate absent the issuance of refund coupons.*fn14 The fact that the court found that version of § 471-e ineffective does not vitiate the statutory liability set forth in § 471 and does not support a finding that the latter statute cannot operate absent regulations designed to facilitate its enforcement. See Cayuga Indian Nation, 2008 WL 5158093, at *4 ("Section 471-e was merely designed to facilitate the state's collection of cigarette taxes arising from Indian sales to non-Indian consumers . . . . § 471-e does not create the tax obligation itself, although it refers to it. The tax obligation itself long ago was established by the legislature . . . .").
Milhelm Attea, a case decided by the Supreme Court in 1994, arose in response to the DTF regulations adopted in 1988.*fn15
Moe,*fn16 Colville,*fn17 and Potawatomi*fn18 make clear that the States have a valid interest in ensuring compliance with lawful taxes that might easily be evaded through purchases of tax-exempt cigarettes on reservations; that interest outweighs tribes' modest interest in offering a tax exemption to customers who would ordinarily shop elsewhere. The balance of state, federal, and tribal interests . . . in this area thus leaves more room for state regulation than in others. In particular, these cases have decided that States may impose on reservation retailers minimal burdens reasonably tailored to the collection of valid taxes from non-Indians.
B. Change in Theory*fn19
The threshold question, then, is whether the government did change its theory. However, before addressing that issue, a brief overview of the relevant ...