CIGARETTE BROKER AND WAREHOUSE CO-OWNER SENTENCED FOR TRAFFICKING IN UNTAXED CIGARETTES
Both Hit with Prison Sentences and Millions in Restitution to State of Washington
Two people who conspired to sell contraband cigarettes to tribal smoke shops in Washington were sentenced today in U.S. District Court in Seattle to prison terms and tens of millions in restitution for their criminal conspiracy. RICK CONN, a cigarette broker based in California, was sentenced to 20 months in prison, three years of supervised release, and more than $20 million in restitution for Conspiracy to Traffic in Contraband Cigarettes, and Conspiracy to Launder Monetary Instruments. CAROL M. SILVERMAN, who owned a cigarette distribution business and controlled a Clackamas, Oregon warehouse, was sentenced to 12 months and a day in prison, three years of supervised release and more than $18 million in restitution. At sentencing U.S. District Judge John C. Coughenour said, “these acts were engaged in for monetary reasons and no other reasons.”
CONN and SILVERMAN were indicted in September 2009, in connection with a scheme to sell contraband (untaxed) cigarettes to Blue Stilly Smoke Shop, located on the Stillaguamish reservation, near Arlington, Washington. In the statement of facts in his plea agreement, CONN admits to brokering a cigarette deal between Cowlitz Candy and Tobacco and Blue Stilly Smoke Shop, where Cowlitz Candy illegally sold untaxed cigarettes to Blue Stilly. CONN conspired with the owner of Cowlitz Candy & Tobacco, the owners of the Blue Stilly Smoke Shop, CAROL SILVERMAN and her then-husband and co-defendant Jay Silverman, to ship more than a million cartons of untaxed cigarettes to Blue Stilly. After Cowlitz Candy received a notice from the Washington State Liquor Control Board instructing it to stop selling untaxed cigarettes to Blue Stilly, the conspirators took steps to evade detection and further their scheme to avoid more than $20 million in cigarette taxes. They created false invoices and routed the shipments of cigarettes through SILVERMAN’s warehouse in Clackamas, Oregon to disguise the fact that they were making sales to Blue Stilly.
Matthew Cunningham, who provided the falsified invoices in the scheme and Jay D. Silverman co-owner of the warehouse have both pleaded guilty and will be sentenced later this year.
Robert Stuber, who owned Cowlitz Candy & Tobacco Co., Inc, was sentenced to nine months in prison for his role in the conspiracy. The former owners of the Blue Stilly Smoke Shop were sentenced to prison in March 2009, for their scheme to profit from selling untaxed cigarettes. Edward Leverne Goodridge, Sr., 60, and Edward Goodridge, Jr., 33 both of Arlington, Washington, and Sara Lee Schroedl, 40, now of Prescott, Arizona pleaded guilty in November 2008, to Conspiracy to Traffic in Contraband Cigarettes and Engaging in Monetary Transactions involving criminal proceeds. The three tribal members were on the tribal council when they set up a corporation to run the Blue Stilly Smoke Shop for their own personal profit. The Goodridges were each sentenced to 14 months in prison and two years of supervised release. Schroedl was sentenced to eight months in prison and two years of supervised release. All are jointly responsible for more than $25 million in restitution to Washington State.
The SILVERMANs were also involved in selling contraband cigarettes to the operators of Frank’s Landing smoke shop. Henry and Allison Gottfriedson were sentenced on March 2, 2009, to five years probation, 240 hours of community service, as well as restitution in excess of $9.2 million and the forfeitures totaling more than $2.5 million for selling more than 700,000 cartons of contraband cigarettes. The SILVERMANs collected cash payments, as much as $70,000 at a time, from the Gottfriedsons to pay for the untaxed cigarettes they supplied. The cash was deposited in amounts under $10,000 to avoid currency reporting requirements.
In asking for prison sentences, Assistant United States Attorney Mary Dimke noted that these non-tribal defendants knew they were obligated to pay the taxes. “Here, the defendants have no argument that they were engaging in any kind of civil disobedience in breaking the law, in that they believed that Native Americans should have the legal right to sell untaxed cigarettes. They sold contraband cigarettes to Blue Stilly and Frank’s Landing because of pure greed,” Ms. Dimke wrote in her sentencing memo.
The cases were investigated by the Bureau of Alcohol, Tobacco, Firearms & Explosives (ATF), the Internal Revenue Service Criminal Investigations (IRS-CI), and the Washington State Liquor Control Board. The cases are being prosecuted by Assistant United States Attorneys Mary K. Dimke, Richard E. Cohen, and J. Tate London.
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.