CIGARETTE WHOLESALER SENTENCED FOR TRAFFICKING IN UNTAXED CIGARETTES
New Mexico Distributor Continued to Ship Contraband Cigarettes after Law Enforcement Raids
MATTHEW M. CUNNINGHAM, a tobacco products distributor in New Mexico, was sentenced today in U.S. District Court in Seattle to 18 months in prison, three years of supervised release and $21,545,000 in restitution for Conspiracy to Traffic in Contraband Cigarettes, and Conspiracy to Launder Monetary Instruments. CUNNINGHAM was indicted in September 2009 in connection with a scheme to sell contraband cigarettes to Blue Stilly Smoke Shop in Arlington, Washington. CUNNINGHAM pleaded guilty in January 2010, admitting illegally selling untaxed cigarettes to smoke shops in the Frank’s Landing Indian Community and on the Swinomish Indian Reservation as well. U.S. District Judge John C. Coughenour imposed the sentence saying it was an appropriate term of imprisonment compared to the other defendants in the case.
CUNNINGHAM was part of a conspiracy with the owner of Cowlitz Candy & Tobacco and the owners of the Blue Stilly Smoke Shop to ship more than a million cartons of untaxed cigarettes to the Snohomish County smoke shop. The conspirators took steps to disguise the ownership of the shipments and created false invoices to further their scheme to avoid more than $20 million in cigarette taxes. The conspirators sent shipments of cigarettes through a warehouse in Clackamas, Oregon, after the Washington State Liquor Control Board notified Cowlitz Candy & Tobacco to stop delivering untaxed cigarettes. CUNNINGHAM’s company, MRC Enterprises LLC, was to be reimbursed for the shipping expenses and paid an additional $500 for every shipment of untaxed cigarettes shipped from the Clackamas warehouse under the MRC name. The paperwork was falsified to make it appear the cigarettes were purchased from MRC Enterprises LLC.
In his plea agreement CUNNINGHAM further admits that after search warrants were served on the Blue Stilly Smoke Shop in May 2007, CUNNINGHAM continued for a year to sell contraband cigarettes to the smoke shop, resulting in a tax loss of more than $3 million to Washington State. From May 2004 to June 2006, CUNNINGHAM and co-defendant Jay Silverman sold at least 268,896 cartons of contraband cigarettes to Frank’s Landing, resulting in a tax loss of more than $4 million to the State of Washington. Additionally, CUNNINGHAM sold more than 6,000 cartons of contraband cigarettes to The Trading Post at March Point on the Swinomish Indian Reservation near Anacortes, Washington. The tax loss to Washington State was more than $120,000. Jay Silverman and Cunningham split the cash proceeds of these sales and made structured deposits in amounts of less than $10,000 in their bank accounts to avoid currency reporting requirements.
In asking for the18 month sentence, Assistant United States Attorney Mary Dimke noted that the untaxed sales not only hurt the Washington State tax revenues, it hurt the tribes and the owners of small businesses trying to compete with the sellers of untaxed cigarettes. “Suppliers, like Cunningham, who provided retailers untaxed cigarettes gave Blue Stilly and Frank’s Landing this competitive advantage, and enabled them to inflict the damages they caused to the State of Washington in tax losses as well as to the smoke shops’ competition. Such damage is clear, and it is significant,” Ms. Dimke wrote in her sentencing memo.
Two defendants were sentenced to prison terms in July 2010: Carol M. Silverman was sentenced to one year in prison; Rick Conn was sentenced to 20 months in prison. Jay D. Silverman is scheduled for sentencing in November 2010.
Robert Stuber, who owned Cowlitz Candy & Tobacco Co., Inc, was sentenced in December 2009, 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 $21 million in restitution to Washington State. CUNNINGHAM and the other defendants who were cigarette wholesalers and distributors are also liable for the restitution.
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.