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Post date: December 21 2012

A.G. Schneiderman Sues Major Dealer Of Contraband Cigarettes King Mountain Tobacco Co.

8,000 Cartons Of Cigarettes Found In Truck Without Required Tax Stamp Means Potential Tax Loss To State Of $365K; Also Contraband Cigarette Sales On Long Island

A.G. Schneiderman: Illegal Sales of Cheap, Untaxed Cigarettes Are A Major Public Health Hazard And Encourage Deadly Habit For Young People


NEW YORK - Attorney General Eric T. Schneiderman announced today that his office has filed a lawsuit against King Mountain Tobacco Company, a major manufacturer and distributor of contraband cigarettes being sold in New York State, and its president, Delbert Wheeler. King Mountain, based in Washington State, illegally sells hundreds of thousands of its cigarettes in New York each year without paying the required state excise taxes, in violation of both state and federal law.

"Illegal sales of untaxed cigarettes are a major public health hazard. King Mountain Tobacco is making cheap cigarettes available and encouraging young people to take up a deadly habit,” Attorney General Schneiderman said. “These illegal sales deprive the state of hundreds of thousands of dollars of much needed tax revenue and put law-abiding businesses at a competitive disadvantage. New York is committed to stopping such contraband sales."

According to the complaint filed today in U.S. District Court for the Eastern District of New York, King Mountain sells and distributes its cigarettes in New York without shipping them to a New York State licensed stamping agent as required by state tax laws.  Licensed stamping agents are the only entities in the State authorized by the New York Department of Taxation and Finance to affix a tax stamp and collect the excise tax due. On-reservation cigarette sales to tribal members can be made tax-free but those cigarettes must nonetheless have the tax stamp affixed by a licensed stamping agent.

The lawsuit is the result of an ongoing investigation into contraband cigarette sales across the state. The lawsuit charges King Mountain with selling illegal cigarettes in New York and is based on several incidents that establish the company is selling and trafficking large quantities of illegal, untaxed cigarettes.

On November 6, investigators from the Attorney General's office purchased unstamped King Mountain cigarettes from a smoke shop on the Poospatuck Reservation in Mastic on Long Island. The purchases came as investigators spotted over 50 cartons of King Mountain brand cigarettes on display in the store. On December 3, State Police stopped a truck in Clinton County carrying 84,000 packs, or 8,400 cartons, of unstamped King Mountain cigarettes. According to the police, the driver intentionally sped up in order to avoid a routine commercial vehicle inspection checkpoint.

The federal Contraband Cigarette Trafficking Act (CCTA) makes it unlawful to possess, sell or distribute over 50 cartons of untaxed cigarettes in a state, such as New York, that requires tax stamps and tax collection. Defendants also violated the federal Prevent All Cigarette Trafficking (PACT) Act and New York State tax and public health laws by not reporting these sales to the Department of Taxation and Finance and by not certifying that their cigarettes are fire-safe, as required. The potential tax loss to the state from just this one shipment is over $365,000.

Wheeler and his company face up to five years in prison and $25,000 in fines.`

The matter is being litigated by Tobacco Compliance Bureau Assistant Attorney General Marc Konowitz under the supervision of Tobacco Compliance Bureau Chief Dana Biberman and Executive Deputy Attorney General for Social Justice, Janet Sabel.

A copy of today’s complaint can be viewed here:

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