News and Press Releases

FORMER PUYALLUP TRIBAL COUNCIL MEMBER AND SMOKE SHOP OWNER SENTENCED FOR CONTRABAND CIGARETTE SCHEME
Couple Cheating State out of Millions of Dollars in Cigarette Taxes

FOR IMMEDIATE RELEASE
March 3, 2009

HENRY GOTTFRIEDSON and ALLISON GOTTFRIEDSON, operators of Frank’s Landing Indian Discount Tobacco, were sentenced late yesterday in U.S. District Court in Tacoma to five years of probation, 240 hours of community service, and more than $9 million in restitution for Conspiring to Traffic in Contraband Cigarettes and Structuring Currency Transactions. Last August the couple pleaded guilty in connection with a scheme to sell contraband cigarettes to the public at large without paying the applicable State of Washington taxes. The GOTTFRIEDSONs admitted to unlawfully avoiding more than $9.2 million in Washington State taxes and agreed to forfeit more than $1.5 million in cash. ALLISON GOTTFRIEDSON is a former Puyallup Tribal Council member who negotiated how state cigarette tax revenues should be allocated to the Puyallup Tribe. At sentencing U.S. District Judge Benjamin H. Settle commented that he was impressed by the fact that the GOTTFRIEDSONs were respected members of the Native American community, but he said they “exercised bad judgement, and no one is above the law.”

HENRY and ALLISON GOTTFRIEDSON owned and operated the smoke shop, which did business in Olympia, Washington, as part of the Frank’s Landing Indian Community. According to records filed in the case, between January 2001, and October 2007, the GOTTFRIEDSONs purchased and sold contraband cigarettes – those are cigarettes that have no Washington tax stamp, so no state cigarette tax has been paid. The couple sold more than 700,000 cartons of contraband cigarettes from the smoke shop, generating more than $21 million in revenues. The couple failed to pay the State of Washington $9.2 million in taxes. They directed how the profits were spent, using some of their profits to benefit the Frank’s Landing Indian Community. They also attempted to deposit the profits into their bank accounts in such a way that the deposits would not be reported to federal banking authorities. From February of 2003 until October 2007, they intentionally made deposits into their accounts below the $10,000 threshold to avoid the federal reporting requirements. These deposits totaled in excess of $2.1 million.

On May 15, 2007, pursuant to a federal search warrant, the Bureau of Alcohol, Tobacco, Firearms, and Explosives (ATF) and the Internal Revenue Service (IRS) seized more than 53,870 cartons of contraband cigarettes from the smoke shop, and more than $1.3 million in cash that had been stored at the smoke shop and the couple’s home. Agents subsequently seized more than $200,000 from the GOTTFRIEDSONs’ bank accounts.

As part of the plea agreements, the GOTTFRIEDSONs agreed to forfeit more than $1.5 million in cash, 53,870 cartons of contraband cigarettes, and a 2007 Cadillac Escalade. They also agreed to pay restitution to the State of Washington in the amount of $9,201,982.

It is a federal crime to transport, possess, or sell contraband cigarettes, whether on federal land, including tribal reservations, or elsewhere. In their sentencing memo prosecutors say the GOTTFRIEDSONs’ greedy scheme hurt legitimate competitors. “The defendants are intelligent and industrious people who, seemingly guided by greed and acquisitiveness on the backs of other
taxpayers, declared themselves above the revenue laws,” prosecutors wrote in their sentencing memo.

Assistant United States Attorneys Mary K. Dimke, J. Tate London, and Richard E. Cohen prosecuted the case. Mr. London serves as the Tribal Liaison for the United States Attorney’s Office. The Bureau of Alcohol, Tobacco, Firearms & Explosives (ATF), Internal Revenue Service Criminal Investigation (IRS-CI), and the Washington State Liquor Control Board investigated the case.

For additional information please contact Emily Langlie, Public Affairs Officer for the United States Attorney’s Office, at (206) 553-4110 or Emily.Langlie@USDOJ.Gov.

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