Idaho Couple Sentenced for Cigarette Trafficking

Peter Mahoney and Peggy Mahoney are an Idaho couple who federal prosecutors say were the ringleaders of a cigarette trafficking scheme that cost the state of Washington millions of dollars in uncollected taxes.^[1] The two have been sentenced in federal court.^[2]

The Mahoney’s, two of the five people who have indicted in this case, were operators of the Warpath Smoke Shop on the Coeur d'Alene Indian Reservation at Plummer, Idaho.^[3] They were sentenced Friday Oct. 19, in U.S. District Court for trafficking in contraband cigarettes, Assistant U.S. Attorney Tom Rice said Monday. Peggy Mahoney's brother, Mark Van't Hul also was sentenced Friday to two years probation for his role in the trafficking scheme.^[4] Lyle Conway and Shawn Conway previously were sentenced to two years probation.^[5]

Federal prosecutors asserted that Van't Hul typically would rent a van in Spokane, drive to Idaho, and pick up unstamped cigarettes from the Warpath complex.^[6] Van't Hul allegedly then delivered contraband cigarettes to the two Conways and others on the Puyallup Reservation in Western Washington.^[7] Van't Hul would then return to Idaho with checks from the retailers as payment for the cigarettes.^[8] It has been alleged that the conspiracy cost Washington as much $7 million in potential cigarette tax revenues.^[9]

Smoke shops on reservations may legally sell cigarettes without state taxes only to tribal members, and large shipments of cigarettes must bear state tax stamps.^[10]

Peter Mahoney was sentenced to 33 months in prison after pleading guilty to conspiracy to traffic in contraband cigarettes and money laundering.^[11] Peggy Mahoney was sentenced to six months of house arrest and three years of probation after pleading guilty to one count of contraband cigarette trafficking. ^[12]

Under the Contraband Cigarette Trafficking Act it shall be unlawful for any person knowingly to ship, transport, receive, possess, sell, distribute, or purchase contraband cigarettes.^[13] It shall also be unlawful for any person knowingly to make any false statement or representation with respect to the information required by this chapter to be kept in the records of any person who ships, sells, or distributes any quantity of cigarettes in excess of 60,000 in a single transaction.^[14]

The definition of “contraband cigarette” is found in 18 U.S.C § 2341 and it is defined as the term “contraband cigarettes;” it means a quantity in excess of 60,000 cigarettes, which bear no evidence of the payment state cigarette taxes in the “State where the cigarettes are found, If such State requires a stamp, impression, or other indication to be placed on packages or other containers of cigarettes to evidence payment of cigarette taxes”).^[15]

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^[1] AP Staff, Idaho couple sentenced for smuggling untaxed cigarettes, Associated Press Newswire, October 19, 2007, available at LEXIS, News Library, Wire News Services File.
^[2] Id.
^[3] Id.
^[4] Id.
^[5] Id.
^[6] Id.
^[7] Id.
^[8] Id.
^[9] Id.
^[10] Id.
^[11] Id.
^[12] Id.
^[13] 18 U.S.C. § 2342 (a) (2007).
^[14] Id. at § 2342(b).
^[15] 18 U.S.C § 2341(2007).