Tobacco Industry: Canada The Kahnawake Advantage Page 1

Sun, March 4, 2007

By JOE MATYAS, SUN MEDIA

The search for cheap smokes in the area includes smuggling and contraband

Every three weeks or so, Rita and her spouse take a half-hour drive from London to a local First Nations community to buy cheap cigarettes.

In Rita’s house, every penny counts. With a modest family income, $70 for a carton of brand-name cigarettes is a steep price to pay for “one of the simple pleasures of life.”

On the reserve, Rita can buy 200 no-name, untaxed, machine-rolled cigarettes with filter tips in a plastic bag for about $8.

“They’re every bit as good as the brand names,” she says.

Rita (not her real name) smokes about a dozen cigarettes a day and a bag of “rollies” lasts her about two weeks.

“Most of the smokers on my street get their cigarettes the same way I do,” she says, “and so does my sister. She buys bags of them for other people as well as for herself.”

Rita says she’s seen sidewalk vendors sell no-name cigarettes out of cardboard boxes in downtown London for about twice what she pays on the reserve.

Theft of cigarettes from stores and homes would be rampant if cheap smokes weren’t available, she says

Rita says she’d probably quit smoking if the only cigarettes available were the highly taxed, high-priced brand names.

And that’s precisely why the London-Middlesex Health Unit has joined Physicians for a Smoke-Free Canada in a battle against contraband cigarettes.

Cheap smokes make it easy for young people to start smoking and hard for older people to quit, says Dr. Graham Pollett, medical officer of health.

And loopholes in the law make enforcement difficult, he says.

The Ontario Finance Ministry, responsible for tobacco sales in the province, told Sun Media it’s illegal for Ontario residents to buy or sell cigarettes on which no taxes have been paid.

Tax-free black market cigarettes are available in the London area to anyone who wants to buy them, a Middlesex County convenience store owner said.

He said his cigarette sales have plunged 80 per cent in the last five years because of contraband tobacco.

“Customers who still buy other things from me — bread, milk, pop, chips, lottery tickets — have told me where they get their cigarettes,” he said.

They’re available in town at the homes of dealers who sell them to teenagers who can’t buy them in stores if they’re under 19, he said.

Some of the dealers also sell marijuana and other drugs, he said.

During a visit to the Six Nations reserve near Brantford in December, Physicians for a Smoke-Free Canada said they found major brand names for sale in stores at $67 a carton, native brands on which excise taxes were paid for $29 and no name cigarettes available in “smoke shacks” at a price of $9 for 200 packaged in clear plastic bags.

The physicians are asking the federal and provincial governments to crack down on the smuggling and sale of contraband tobacco.

They’ve also asked Canadian banks to stop allowing credit card purchases of black market cigarettes.

—

ONTARIO TOBACCO LAWS

– It is illegal to buy or sell cigarettes on which no taxes have been paid.

– Legal cigarettes are identified by the presence of a yellow Ontario — Canada Duty Paid tear strip.

– The taxes on a carton of cigarettes — federal, provincial and GST — total $43.57.

– Legal cigarettes have federal health warnings on their packages.

– Some on-reserve retailers are authorized to sell tax-exempt cigarettes in packages with peach-coloured Canada Duty Paid tear strips.

– Quantities are limited and for sale on reserve only to First Nations residents for personal use.

– Unmarked, no-name cigarettes are illegal products on which no taxes have been paid.

– The penalty for possessing 10 kilograms or more of untaxed tobacco is a fine of eight times the value of taxes due.

– The penalty for possessing one kilogram or more of untaxed tobacco is a fine of three times the value of taxes due.

– The penalty for selling, transporting or possessing unmarked tobacco for sale is forfeiture and a fine of three to eight times the value of taxes due.

---

The Tobacco Kings
Oct 2, 2006
The Hamilton Spectator

Six Nations powerbrokers Jerry Montour and Ken Hill control a business empire worth millions of dollars.

And one of their companies fuels one of the world’s most popular online gambling sites. SixNet, is listed as the operator of computer servers that illegally host online poker gaming.

An investigation by The Spectator has found that same business, on the Six Nations reserve south of Hamilton, was also awarded more than $1.5 million in federal government contracts.
Spectator Investigation A10-A11

———

Federal cash goes to Six Nations firm linked to illegal online gambling

Online gaming divides Six Nations

By Steve Buist and Joan Walters
Special to the Hamilton Spectator(Oct 2, 2006) Page A10-11

picture location

These men are the principals of a cigarette manufacturing enterprise that stretches from the Six Nations reserve across the world. Grand River Enterprises recently won a $70-million contract to supply smokes to the German army. Last July, GRE opened a plant in Germany. On hand at the opening ceremony were, from left, Curt Styres, Jerry Montour, Don Skye, Peter Montour and Ken Hill.

Special Report: The first of a four-part series probing an empire built on tobacco; Ottawa hands out contracts to Ohsweken company linked to illegal computer gambling. Elected band chief warns about the ‘dark side’ of ‘big money and tobacco.’

The federal government has awarded more than $1.5 million in contracts this year to a company on the Six Nations reserve that is associated with illegal online gambling.

SixNet is a company listed as the operator of computer servers on the reserve that host gaming sites that include Absolute Poker, one of the world’s most popular Internet gambling destinations.

Based in Costa Rica, but operating on SixNet servers, Absolute Poker gets up to 6,000 players an hour at peak times for its real-money tournaments.

Hosting such an online gaming operation on Canadian soil is an offence under the Criminal Code.

And the issue of illegal use of servers on Six Nations land has caused an explosive split on the reserve.

A Spectator investigation shows SixNet has at least six purchasing agreements with the government to supply name-brand computer software for the use of federal office workers.

The government software customers are Indian and Northern Affairs, Health Canada, Agriculture and Food, Foreign Affairs and International Trade and Public Works and Government Services.

Government officials would not answer questions specifically about SixNet.

But in general, the officials said, purchasing officers are required only to verify that a company is capable of delivering the goods it has been retained to supply.

“THEY WOULDN’T be looking at the firm as to what kind of other business interests they’d be involved in,” said Allan Frost, a director at Indian and Northern Affairs, which lists SixNet as a supplier for about $950,000 worth of computer software and related goods.

The contracts raise important questions about the government’s accountability and screening processes.

Duff Conacher, head of the Ottawa-based citizen group Democracy Watch, has reservations about the screening process.

“They should be doing more research,” he said.

“The public service overall — and the businesses it deals with — should be upholding the standards that the Canadian public expect, in everything they do.”

The principals behind SixNet are Jerry Montour and Ken Hill. They are major figures involved in the Six Nations’ international cigarette manufacturing business known as Grand River Enterprises, which recently won a $70-million contract to supply smokes to the German army.

SixNet is located in the Grand River Enterprises building on the Ohsweken reserve.

SixNet is designated as an official aboriginal supplier to the government under a minority business support program that sets targets for spending on businesses operated by natives.

The goal is to try to strengthen First Nations enterprises by ensuring they have access to some of the $13 billion a year spent annually by government through purchasing contracts.

George Butts, a director general at Public Works, the government’s central purchasing group, said he was not aware of the details of his own department’s relationship with SixNet.

But policies in general, he said, are focused on making sure contractors have the experience, finances and business credentials to deliver on commitments to the government.

There are no broader checks done before selecting a company as a supplier.

“We approach the system really from the fact that we’re doing business with firms that are good corporate citizens,” said Butts, a senior civil servant with more than two decades of experience in federal purchasing.

“We’ve got enough bureaucracy in the system, we don’t try to add more layers.”

For Hill and Montour, SixNet is part of a massive business operation with sales of hundreds of millions of dollars a year.

Stretching from its Six Nations base to Europe and the Caribbean, it’s a conglomerate that includes everything from cigarette manufacturing, mining and bottled water to smaller operations as diverse as construction, gas bars and a junior hockey team.

The scope of the businesses and the personal economic clout of Hill and Montour give them tremendous power at Six Nations — through the jobs they supply, the donations they make through a corporate foundation funded by the cigarette company and the day-to-day events they are able to influence.

Montour and Hill — through their lawyer — declined repeated requests from The Spectator for an interview about Grand River Enterprises and its associated companies.

The two men also have found themselves at the centre of legal troubles in the past.

Hill, a Six Nations Mohawk, is back in court on Oct. 11 on two assault charges related to an incident in June in Caledonia, near the site of the lengthy, well-publicized native occupation of a disputed housing development.

JERRY MONTOUR, a Mohawk from the Wahta reserve in Muskoka who lives in east-end Hamilton, spent time in jail in Canada in the late 1980s after being convicted of conspiring to import marijuana from Mexico.

Grand River Enterprises, which employs about 200 people, is the largest private employer on the Six Nations reserve and one of the largest native employers in Canada.

Many in the community see Hill and Montour as the big-money drivers of the economy of Six Nations, Canada’s most populous reserve with about 22,000 members. About half of them live off the reserve.

“Probably every single person has had or will have someone in their family who has worked for GRE,” said Hazel Hill, who has come to public attention as a spokesperson for the reclamation of Douglas Creek Estates — the Caledonia subdivision occupied in the land claim dispute since February.

Hill and Montour “definitely have resources to support political agendas and initiatives that they feel appropriate,” said Dawn Martin-Hill, head of McMaster University’s indigenous studies program and a Six Nations resident.

“That’s not abnormal for any businessman in their situation.”

Over the last 15 years, Hill and Montour’s operations have gradually expanded from the limited confines of Six Nations to the more sophisticated opportunities of the world at large — including status as official supplier of 3.5 million bottles of Wahta Springs water for the famed Rolling Stones fundraising concert in Toronto in 2003 and SixNet’s recent emergence as an aboriginal supplier to government.

But use of servers that enable Internet gaming sites to operate is not approved — either by the Six Nations band council or by Canadian law.

Gaming has split the Six Nations community for a number of years.

The issue became more heated just last week when Elected Band Chief David General issued a warning to the community not to be enticed “to the dark side” by “big money and tobacco.”

He said he was not referring to specific members of the reserve. He was reflecting the split between those who are drawn to the idea that gambling can produce strong revenue and business opportunities and those who worry about the impact of gambling on families and traditional First Nations society.

“I still maintain that the only way to find out if our community is willing to accept Internet gaming is to take it to a referendum,” General told The Spectator. “Internet gaming is still illegal in Canada and the U.S.”

He added that he does not know “at this time, if SixNet is pursuing providing their services to on-line casinos.”

But a spokesperson for Absolute Poker said SixNet is the provider of Absolute’s online servers.

“We’ve had our Six Nations, or the SixNet, licence for about three years and the games are hosted out of their facility in Ontario,” said Jason Reindorp, a media relations spokesperson for Absolute Entertainment S.A, the Costa Rica-based parent of the poker site.

Hosting, licensing or promoting online gambling is illegal in Canada under Sections 202 and 206 of the Criminal Code.

It’s not illegal to take part in online gambling as a player.

But some aboriginal communities claim they have rights as sovereign nations to license and operate online gambling systems for offshore companies, in contravention of the Canadian law.

The Kahnawake Mohawks, just south of Montreal, have been hosting hundreds of online gaming sites for the last 10 years without charges being laid.

Their Kahnawake Gaming Commission is considered one of the world’s largest hosts of online sites.

At Six Nations, SixNet is listed as the computer hosting facility for online gaming sites licensed by two Internet gaming agencies based on the reserve.

The two licensing groups are known as the Six Nations Internet Gaming Regulatory Body and the Haldimand Mohocks and Allies Gaming Commission.

SixNet, Six Nations Internet Gaming Regulatory Body and the Haldimand Mohocks and Allies Gaming Commission are all located in the same office — in the headquarters of the Grand River Enterprises cigarette factory on Chiefswood Road in Ohsweken.

A 45-page application form for those seeking an online gaming site licensed by the Haldimand Mohocks group indicates that SixNet is the exclusive hosting facility and that the gaming activities are conducted from a SixNet facility located on “Grand River Mohock Lands.”

A HALDIMAND Mohocks gaming licence costs $3,000 US per month per site, along with a $5,000 US non-refundable application deposit.

The Six Nations Internet Gaming Regulatory Body also has a direct link to SixNet on its website.

Three years ago, Hill and Montour approached the Six Nations band council as representatives of SixNet in a failed attempt to seek approval for online gambling.

The two were asked to provide a legal opinion and a business plan for the proposal, which the band’s Economic Development Committee says were never received.

The band council did obtain its own legal opinion, however, which suggested that “Internet gaming activity in Canada directed at customers who reside in Canada or in foreign countries was not authorized under the Criminal Code.”

But The Spectator’s investigation shows that even though they never received band approval, SixNet and the Six Nations Internet Gaming Regulatory Body have been involved with at least one online gaming site since around the time of the meeting with the band council in 2003.

The Spectator also discovered one signed copy of a licence issued by the Six Nations Internet Gaming Regulatory Body.

At least three online gambling sites are licensed by the Six Nations Internet Gaming and Haldimand Mohocks groups — Absolute Poker, Absolute Poker Lady and Goal Poker.

According to the iGaming Business Directory’s summer 2006 figures, Absolute Poker is the world’s third-largest online poker room, based on website traffic. Reindorp, the Absolute spokesperson, indicated his company’s sites are licensed by both the Six Nations Internet Gaming Regulatory Body and the Haldimand Mohocks.

Because countries such as Canada and the United States consider the delivery of online gambling to be illegal, many of the world’s Internet gaming sites are hosted on computer servers located in places such as Belize, Antigua, Costa Rica or the Isle of Man.

Bowman International, a large sports betting operation, is located on the island of Mauritius in the Indian Ocean.

For those who operate online gaming sites, having computer servers offshore raises issues of reliability, service and the integrity of the games.

It also has become a thorny legal issue.

The U.S. is currently engaged in a highly-publicized anti-racketeering campaign that has targeted the operators of online gaming.

The CEO of BetOnSports PLC, a publicly-traded online gaming company, was arrested in Dallas in July as he was waiting to change planes on his way from London to Costa Rica.

The former chairman of Sportingbet PLC, another public online gaming company, was arrested last month at New York’s Kennedy Airport when he stepped off a flight from England.

SixNet, the two Six Nations licensing bodies and the Kahnawake Gaming Commission are attractive to offshore gaming companies that want to take advantage of Canada’s political and economic stability as well as its advanced technological capabilities.

“Canada has some of the best infrastructure in the world,” said Michael Lipton, a Toronto lawyer who is considered one of Canada’s leading experts on gaming law.

SixNet promotes itself as a reliable and secure state-of-the-art network that offers round the clock staffing support. In fact, SixNet’s main message on its website states: “Bringing your offshore hosting back to the mainland.”

Montour told Six Nations council three years ago that SixNet had spent almost $1.2 million to install special fibre wires and equipment for the computer hosting site.

There have been few Internet gambling cases tested in Canadian courts.

The precedent in this area is considered in a Vancouver case involving Starnet Communications.

THE COMPANY operated online gaming sites from computer servers in Antigua but police discovered one gaming-related server that was in Vancouver.

Starnet was charged under a section of the Criminal Code that makes it illegal to keep any machine or device for gambling, betting or recording and registering bets.

The company pleaded guilty to one count in 2001, was fined $100,000 and forfeited $4 million US under proceeds of crime provisions.

Native claims, such as those made by the Kahnawake Mohawks, that they retain sovereign rights over online gaming have never been properly defined in court.

“Has it been tested in the courts? No. Are (the Kahnawake Mohawks) carrying on openly and transparently? Yes,” said Lipton.

“Does the Quebec government know about it? Yes.

“Has the Quebec government gone on record to say that it’s legal or illegal? They said that it’s illegal back in 2001 but they haven’t done anything about it.”

————-
Tobacco’s billion-dollar empire

Tobacco Kings, Chapter 2

(Oct 3, 2006)

By Steve Buist and Joan Walters The Hamilton Spectator OHSWEKEN

It’s a long, long way from the tiny smoke stands at Six Nations to the German army.

From modest beginnings 14 years ago, Grand River Enterprises has become a cigarette manufacturer with worldwide reach, now doing hundreds of millions of dollars in business a year.

The numbers behind the Ohsweken-based company’s growing success are staggering.

By 2004, GRE was reportedly selling the equivalent of six million cigarettes a day in the United States alone.

That’s 70 cigarettes every second of every day for an entire year.

Since acquiring a federal licence to make cigarettes in 1996, it has paid at least $400 million — by the company’s own calculations — in excise taxes alone.

Based on that figure, it suggests Grand River Enterprises has sold at least $1 billion worth of tobacco products over the past decade as a licensed Canadian manufacturer.

And now the company has added a reported $70-million deal to be the official supplier of cigarettes to the German army.

Grand River Enterprises is reportedly the first foreign company to win a contract with Germany’s Ministry of Defence.

GRE’s global span was on full display in June when the company celebrated the opening of its new manufacturing plant in Brandenburg, Germany.

Among the five smiling faces standing in front of the building for a photo op were Ken Hill, Jerry Montour and Montour’s father, Peter.

Hill, the company’s senior marketing officer, and Jerry Montour, the CEO, are the two principal founding partners of GRE, and they now describe themselves in a legal document as the company’s controlling shareholders.

For Hill and Montour, GRE represents the economic engine of a diverse business empire that includes everything from a mining development to bottled water to construction to several federal government contracts for computer supplies.

They’ve taken GRE from a cramped steel building on one of the reserve’s concession roads to a modern, gleaming factory that’s 25 times the size — with a second factory now on the other side of the Atlantic.

They’ve gone from fighting federal tax inspectors over smuggling allegations in the days before they had their licence to fighting the United States government today over the North American Free Trade Agreement (NAFTA).

A document filed in a GRE court case suggests that at one point the company projected its 2005 profit would be $60 million.

If accurate, it suggests Hill and Montour — who collectively own 40 per cent of GRE’s shares — are reaping tens of millions of dollars in profits a year.

Another court document suggests a group of GRE shareholders was paid $15 million in bonuses in 2002, when the company’s sales for the year were about $86 million.

Montour is reported to have received more than $5.6 million of 2002’s bonuses while Hill reportedly received almost $1.9 million.

Since then, GRE’s annual sales appear to have skyrocketed, perhaps reaching and exceeding $300 million last year, according to other court documents.

And sales might even be substantially higher. The company sells the equivalent of about $75 million in smokes a year just to northern Ontario reserves alone, according to the person who helps run GRE’s northern warehouse in Blind River.

The $75-million figure doesn’t include smokes sold at southern Ontario reserves or at Six Nations itself.

That’s significant because GRE’s president has sworn in a court document that only 25 per cent of the company’s products are sold in Canada. The rest are exported.

And that doesn’t count the additional production that has been added in Germany.

One German news story in July said the company expects to produce 2.5 billion cigarettes initially at the new plant, with that number almost tripling in three years’ time.

GRE is the largest private employer on Six Nations, Canada’s most populous native reserve.

In 2000, GRE had 51 employees. By 2002, it had grown to almost four times that size, with 198 employees.

The company’s brands are sold at the dozens of smoke shops that dot Six Nations.

They’re sold at native reserves in Ontario and on and off reservations in the United States. They are also sold in places as diverse as Jamaica and Germany.

But for all of GRE’s economic clout and business success, few people were prepared to speak publicly with The Spectator about the company or its principals.

Neither Montour nor Hill responded to Spectator requests for an interview.

The same was true for Six Nations Chief David General, as well as the reserve’s former chief, Roberta Jamieson, who is now chair of the National Aboriginal Achievement Foundation in Toronto.

All General would say, in an e-mail, was that GRE is “a successful local business that has markets worldwide.”

GRE did not respond to a list of questions for basic information about the company submitted by The Spectator to Lynda Powless, who handles media relations for GRE. Powless is also publisher of the Turtle Island News in Ohsweken.

Some of the information about GRE’s business operations comes from documents filed in two separate legal cases.

* In one, Grand River Enterprises is seeking $340 million US from the United States government based on the company’s claim it has faced discrimination under NAFTA.

* In the other case, GRE is involved in a nasty dispute with one of its own minority shareholders that has dragged on for six years.

The company is suing shareholder Sidney Burnham for $3.1 million in damages after a falling-out related to the original cigarette plant, which was located on Burnham’s property.

Burnham, in turn, has countersued his partners, alleging they have been withholding his share of the company’s profits from him.

As a result, GRE has been forced to turn over a substantial amount of financial information about its business, and it provides an interesting peek at the firm’s inner workings.

Burnham declined to comment for this Spectator report.

His allegations against GRE and the company’s allegations against him have not yet been proven in court. A decision in the case is still pending.

As well, GRE’s claims in its NAFTA challenge against the U.S. government have not been proven before the panel hearing the case.

* * *

Jerry Montour and Ken Hill have been in the cigarette business together since 1992.

Montour, a 45-year-old Mohawk from the Wahta reserve near the Muskoka town of Bala, lives in Hamilton’s east end.

Hill, 48, is a Six Nations Mohawk who has built up significant landholdings on the reserve over the past two decades.

Taking advantage of North American native treaty rights, the two men focused their attention on the discount cigarette market.

In 1992, they entered into a joint venture with Larry Skidders, a native who lived on the Akwesasne reserve, which straddles the Ontario, Quebec and New York State borders near Cornwall.

Together, they financed the construction of a cigarette manufacturing facility on the American side of Akwesasne where they could begin producing their own brands.

As business grew, Montour and Hill brought in a partner named Art Montour Jr. (no relation), whose distribution skills and contacts were intended to help increase cigarette distribution to the east coast of the U.S.

Art Montour Jr. is originally from the Kahnawake Mohawk reserve south of Montreal. He now lives on the Seneca Nation Territory in western New York, near Buffalo, where he was once a band councillor.

His father has been described as a prominent member of the Mohawk Warrior Society and Art Montour Jr. pleaded guilty to possession of restricted weapons in 1993 after a shipment of Russian guns went missing in Quebec.

Skidders died in 1993, however, and the relationship between Montour, Hill and those representing the Skidders estate began to deteriorate.

Based on their early success at Akwesasne, Montour and Hill then decided to build a much larger cigarette plant at Six Nations, which was constructed on Burnham’s property.

For the first few years, the factory was churning out brands such as Sago, DK and Putter’s without a proper federal licence, which led to some legal problems for members of the Grand River Enterprises partnership, which had been established in 1993.

GRE was handed a substantial fine for overproduction of cigarettes in the mid-1990s.

Peter Montour, Jerry’s father, was convicted of cigarette smuggling in 1997 and fined $640,000, believed at the time to have been the largest penalty ever for smuggling in Ontario.

Peter Montour was one of the original partners in Grand River Enterprises.

As recently as 2002, he described himself as GRE’s manager of sales in an affidavit he filed in a South Carolina court case involving the American company that distributes GRE cigarettes to U.S. native reserves.

In 1988, Peter and Jerry Montour were convicted of conspiracy to import marijuana and sentenced to jail in Canada.

The father and son were described as the key players in a drug-smuggling operation that arranged to have 37 kilograms of marijuana transported from Mexico to Canada.

Peter Montour and another man were also charged in 1988 with attempting to import marijuana but the charges against Montour and the other man were dropped when the other man offered to act as a police informant to help solve a murder investigation that had gone cold.

In 1997, Montour and two other men were charged with extortion and uttering death threats in an alleged attempt to extort $4 million from a former Oakville businessman.

The charges were eventually stayed when the victim failed to show up in court.

Peter Montour did not respond to Spectator requests for an interview.

Hill is currently facing his own legal problems.

He is back in court on Oct. 11 on two assault charges he’s facing related to an incident in June in Caledonia, near the site of the lengthy, well-publicized native occupation of a disputed housing development.

During the mid-’90s, Grand River Enterprises attempted unsuccessfully to obtain a federal licence to make cigarettes, in part because of a disagreement over the payment of excise taxes.

But Burnham, the spurned shareholder now being sued by GRE, suggests in a court document that there may also have been another reason.

Burnham has filed a court affidavit stating that he was part of the GRE group that travelled to Ottawa to meet with government officials to request a licence to manufacture cigarettes.

“It became apparent that a licence would not be issued because of concerns regarding prior criminal convictions against the Montours, particularly Peter Montour,” Burnham stated.

Burnham’s allegation has not been proven in court.

Whatever the reason, the licence impasse was eventually settled to the government’s satisfaction.

In 1996, Grand River Enterprises became an incorporated company and obtained a federal licence to make cigarettes.

In exchange, the company agreed to pay the appropriate excise taxes to the government. The company’s packages also carry the required Health Canada warnings about the dangers of tobacco.

* * *

Not long after GRE obtained its licence, court documents say, Jerry Montour and Ken Hill stepped back from the company to pursue other business interests in the U.S. and Mexico.

For two years in 1997 and ’98, Montour lived on the Omaha Tribe’s reservation in northeastern Nebraska while he acted as a consultant in the tobacco manufacturing business.

The Omaha tribe built a cigarette manufacturing plant there, and Montour, Hill and Art Montour Jr. were partners in the venture.

Montour stated in a court affidavit that he would receive 50 per cent of the net profits of the Nebraska tobacco facility in exchange for providing capital and management expertise.

Montour, Hill and some other investors formed a company called Turtle Island, which was used to participate in the partnership with the Omaha tobacco plant.

After Montour returned from Nebraska and became actively involved in GRE again, Burnham alleges regular shareholder meetings ceased and important business decisions about the company were being made by the Montours and their friends, Steve Williams and Scott Smith.

Williams, a former chief of Six Nations, has been president of Grand River Enterprises since 1997 and Smith owns 10 per cent of GRE’s shares.

By 2000, the relationship between Burnham and the majority of GRE shareholders, including Montour and Hill, had disintegrated.

The company decided to move its production off Burnham’s property to a new location in Ohsweken — a decision that Burnham says he learned about from a newspaper article.

Burnham alleged in an affidavit that he had growing concerns about the cigarette plant when it was located on his property.

He stated that delivery trucks were arriving at times when federal customs inspectors were not around.

“I had good reason to believe cigarettes in excess of the amount of cigarettes GRE was licensed to manufacture were being manufactured,” Burnham stated, “and as the landowner, I could be exposed to criminal charges.”

GRE denies the allegations. The company operates with a valid manufacturing licence and pays the appropriate federal taxes.

But there are also hints of a darker side to the relationship between the feuding shareholders of the cigarette plant.

On January 14, 2000, Burnham gave notice to GRE to be out of the building on his property by March 15.

A week before the deadline, Williams stated he showed up at the original cigarette factory and discovered he’d been locked out. He then went to Burnham’s house.

A young man there told Williams that Burnham was inside the cigarette factory, so Williams returned there. “Mr. Burnham asked me how I knew he was there and I advised him that a young man at his house told me where to find him,” Williams said in his affidavit. “Mr. Burnham said the young man had been advised to shoot anyone who came up the driveway.”

* * *

Since 2000, the growth of GRE’s business has been nothing short of phenomenal.

Documents filed in court show that GRE’s annual sales went from $13.5 million in 2000 to $86.6 million in 2002 to $202 million in 2004.

But the figures might be substantially higher.

One document filed in GRE’s fight against the U.S. government suggests the company sold 2.2 billion cigarettes in 2004 in the United States alone.

That’s the equivalent of 11 million cartons of cigarettes.

In 2004, a carton of GRE’s Sago cigarettes was being sold for approximately $30, which suggests the potential retail value of GRE’s U.S. sales was $330 million.

One of Burnham’s court affidavits refers to a GRE sales forecast for fiscal 2005 which anticipated sales of $334 million, with profits of $60 million.

But who are the people buying all those smokes?

A summary of GRE’s sales for the years 2000 through 2004 filed in court suggests that some of GRE’s own shareholders, including Hill and Montour, have been purchasing staggering amounts of cigarettes from the company.

In fact, one of those purchasers is GRE’s own manager of sales, Peter Montour.

Through a business called Corner Distribution, Hill, Jerry Montour and Peter Montour purchased almost $37 million worth of cigarettes in 2004 from Grand River Enterprises.

In the five years from 2000 to 2004, Corner Distribution purchased more than $78 million in products from GRE.

It’s not clear why Hill and Montour are purchasing large volumes of cigarettes from their own company.

In a court document, Burnham called it “self-dealing,” and a way to divert profits away from Grand River Enterprises.

He pointed out that a number of shareholders or their family members had built up about $14 million in accounts receivable by 2004, a figure that had grown substantially from 2002.

Hill and Montour deny the allegations in rebuttal documents.

In 2004, the third-highest purchaser of GRE products is listed as Richard Gionette, who bought $30 million worth of smokes that year.

Gionette is a band councillor with the Mississauga First Nation, near Blind River, about halfway between Sudbury and Sault Ste. Marie.

Gionette and his wife, Robin, operate a gas bar and convenience store called the Broken Canoe Trading Post on Highway 17 just west of Blind River.

A telephone message for one of the Broken Canoe’s office numbers indicates that the caller has reached Grand River Enterprises and continues with instructions on how to place a cigarette order.

Six Nations’ Grand River Enterprises is a global business. In one year, it sold 70 cigarettes every second, every day. One court document pegs sales last year at $300 million.

Richard Gionette did not respond to a Spectator interview request.

However, Robin Gionette told The Spectator that Broken Canoe acts as a warehouse and distributor of GRE products.

GRE ships its cigarettes to Blind River twice a week, and Gionette has three drivers who make deliveries to northern native reserves from Parry Sound to the Manitoba border.

Robin Gionette said GRE’s Blind River operation handles about $1.5 million a week in sales – the equivalent of about $75 million per year covering northern Ontario alone.

She also said her husband is an employee of GRE and that he receives bonus payments for sales.

She was surprised to learn that her husband was listed as GRE’s third-largest purchaser in 2004 because she said they don’t put up the money for the cigarettes.

Thanks to the new plant in Brandenburg, GRE has gained an important foothold in Germany.

In just its first few months in Germany, GRE reported it had sold three million packs of cigarettes.

The company also indicated it had added Italy, Belgium, France, Sweden and Denmark to its shipping list. And it said it exports cigarettes to Uruguay and South Africa.

* The company has eight shareholders and a total of 110 shares issued: * Jerry Montour (33 shares, or 30 per cent of the company), Ken Hill (11 shares), Curt Styres (11), Sid Burnham (11), Jeff Burnham, Sid’s son, (11), Victor Bomberry (11), Scott Smith (11) and Don Skye (11). * But in the past, nine shareholders have been listed, including Jerry Montour’s father, Peter. * An ongoing court case between Sid Burnham and the other shareholders, excluding Burnham’s son, includes Peter Montour as one of the company’s principals. The shares, the shareholders

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95,000 kilos of tobacco seized from Kahnawake company -QC

A significant cargo of tobacco destined for a Kahnawake enterprise was confiscated at the Port of Montreal by Revenue Quebec agents last Sept. 15.

Eight containers transporting about 95,000 kilos of tobacco in bulk – equivalent to 475,000 cartons of cigarettes – were seized from the Tabac Deport SENC firm operated by Peter Calvin Jacobs and Judy P. Delaronde.

Revenue Quebec submits that the company was having the merchandise delivered to its Kahnawake business location without holding an importer’s permit prescribed by law.

“Moreover, the enterprise of Mr. Jacobs and Mrs. Delaronde does not hold any of the permits required by law for exercising activities in the tobacco domain,” Revenue Quebec explained in a press release.

The government agency does not specify whether charges will be laid against the owners of the company affected.

The operation was conducted with the co-operation of Montreal Police and the Canada the Customs Agency.(Tr: D.R.)

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Cops smoke butt ring
April 28, 2006
By JON WILLING, OTTAWA SUN

Year-old tip leads to arrest of 25 suspects in illegal cigarette operation in Ottawa and Quebec.

MORE THAN 200 cops with six forces in Quebec and Ontario busted a contraband cigarette ring yesterday, one year after receiving a tip about the scheme.

Final details about Project Bleuette are expected to be released this morning, but Quebec provincial police spokeswoman Melanie Larouche confirmed 25 suspects have been arrested so far in the smoke scam.

Quebec provincial police opened a probe when investigators with the MRC des Collines force asked for assistance looking into a tip. Investigators discovered that cigarettes were being transported from Akwesasne and distributed in Ontario and the Outaouais.

The probe hit its climax yesterday morning when Quebec provincial police were joined in raids by 225 officers with the Gatineau, MRC des Collines, Montreal, OPP and RCMP forces.

The first residences were targeted around 5 a.m. and police continued to work throughout the day.

Forty-five residences in total, including about 10 in the Ottawa area, were part of the investigation.

In addition to a few hundred cases of cigarettes, police have seized about 60 cars and recreational vehicles. Early estimates of the seized property totalled over $1 million.

GATINEAU TARGETED

The Ontario searches focused on residences in Ottawa, Embrun, Vars and Hawkesbury, while investigations on the Quebec side targeted numerous communities, but focused heavily in the Gatineau area.

Quebec provincial police and the RCMP have been busy clamping down on contraband cigarettes this year.

Last February, provincial police nabbed 12 Pontiac residents related to possessing and distributing the illegal smokes.

RCMP officers in the Cornwall area have also caught people with contraband tobacco from Akwesasne.

The last week of February brought a series of seizures around Cornwall, with RCMP officers seizing thousands of dollars worth of cigarettes.

jon.willing@ott.sunpub.com

* there is also a poll on the same page in the right column
Would you buy contraband cigarettes to save money?
Yes. 69%
No. 31%
Total Votes for this Question: 1057

Here are a few of the pages that have been translated into English.

Ottawa keeps its eyes closed:

While at war against smoking, Ottawa gives their blessing to the Kahnawake Mohawks to manufacture and flood the market with cigarettes sold at ridiculous prices.

The federal government granted 13 ppermits for cigarette manufacturing plants in the reserves without assuring that the entrepreneurs pay the taxes.

Apparently this is exactly what is happenning. A Kahanwake produced 20 cigarette pack, sells a little more than 2 chocolate bars.

Never, since the first contraband wave in the early 90’s, have we seen prices so low.

Government has created a true black market, says Marc Fortin, from the National Distributors Small Surface Association. ”It’s like the prohibition era”.

No trace of taxes:

According to our sources, the Canadian Customs and REvenue Agency, who we should be reminded are also, the ones responsible for collecting these taxes, granted the permits between fall 2003 and fall 2004.

In order to get a permit, a cigarette manufacturer in a native territory or not, must agree to pay $15.85 per carton to Canada Customs and Revenue, collected directly at production, otherwise their permit will be revoked.

Normally, when these are rights are paid, a strip indicates so on the individually wrapped packages and a sticker is placed on the cartons.

”If there is no strip or sticker, it means the excise taxes have nt been paid, assures Colette Gentes-Hawn, spokesperson for Canada Customs Agency.

The Journal de Montr?al has paid anonymous visits in various cigarette retail outlets in Kahnawake, and no strip or sticker was to be found on most of the packs, cartons or Ziploc bags (containing 200 cigarettes), produced in the reserve.

These bags sell for 16$, the cartons between 20 $ and 26 $ and the 20 cigarette packs between 2$ and 3$, which leads to believe that the production taxes were not paid, at least for the most part, and neither were the sales taxes provincial or Federal.

And the Quebec tax ?

As per the tobacco Quebec law on tobacco, another $20.60 provincial tax per carton, is collected when the wholesaler sells to the distributor.

The Journal de Montr?al asked Lawrence Bergman, the Revenue minister, if Quebec perceived taxes on cigarettes produced in Kahnawake.

”I cannot venture in these specific cases, it is confidential” was Mr. Bergman’s reply.

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Kahnawake leads the way in cigarette production

The Kahnwake reserve has become the native cigarette production capital in Canada.

According to the figures obtained by the Journal, CAnda Customs and Renvue has given so far 20 cigarette production permits in the native reserves across Canada.

With 13 permits out of 20, 60% of all the native cigarettes factories are in Kahnawake.

The other 7 permits were give to Pointe- Bleue, Odanak and Manawan in Quebec, Oshweken, Nipissing and Akwesasne, in Ontario and Portage-La Prarie in Manitoba.

A 14 th permit application from Kahnawake is presently being examined by the agency.

We also found out that a first application for a permit. was asked by Kanesatake, near Oka, where there are presently no cigarette producing facilities.

Discrete factories

Most of these cigarette factories in Kahnawake, were built in big buildings along routes 132, 138 and 207.

One of them, as a matter of fact, was destroyed by a fire last May 31st. It is presently under reconstruction.

But if you pass through Kahnawake, don’t try to find them. Although they got permit from the federal government, they are not visible. On the other hand, some of them advertise and sell their products on the internet.

According to our sources, the Kahnawake factories emply an average of 20 to 60 people and they operate 24/7. Tenths of millions of cigarettes are being produced weekly in the reserve.

In order to obtain a permit from the federal government, the applicant must make a deposit of several hundreds of thousands of dollars.

According to our investigation, a tobacco cutting and rolling machine that has been refurbisjhed, costs $500 000. That is without counting the wrapping machine that costs almost as much.

According to our sources, the Mohawks import these used machines from Swiss and Ireland. They produce their own tobacco in Quebec and Ontario or import it from Virginia.

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Hot potato

– Governments and police lack courage

” We are aware of the problem. We are trying to find long term solutions”. The sale of illegal cigarettes is a real hot potato for the governments and the police, who are openly criticized for their lack of political courage.

In order to fight the black market, Ottawa wants to improve their labelling systen of tobacco products, increase the no. of inspectors and have better control over the tobacco supply.

In Quebec, the Revenue minister, Lawrence Bergman, has just launched a big campaign destined to inform the tobacco retailers.

”Ridiculous. We are not attacking the problem at its heart, we only run around it” says Marc Fortin, president of the Distributors Small Surface National Association.

”It is the whole fiscal system that is being held hostage by a minority. There is a lack of courage from our governments” says Fran?ois Damphousse, from the Non-Smoker’s Rights Association.

Kahnawake – prohibited zone

Except for the peacekeepers, no police force or ministry can venture in the reserve to check if the laws are respected and if the taxes are paid.

At the Quebec Finances Ministry, they proudly reminded us, that a group, called Acces, that is composed of various police forces and Quebec REvenue inspector, was put together in 2001 in order to fight against the contraband.

The problem is, policemen don’t go to Kahnawake.

”Yes, we seize more and more native cigarettes in the convenience stores in the greater Montreal area, but we don’t go in the reserve. It is the RCMP” admitted candidly Yves Riopel, big chief at the Acces program.

At the RCMP, they told us that they do regular seizures in Valley and Cornwall in Ontario, but never in Kahnawake, ” we aim mainly the distribution networks” indicated Michel Lafl?che.

So who is going to go ?

”Our inspectors will go anywhere in Quebec, including in native lands” promised Bergman.

But many are skeptical.

”The first thing to do, would be to stop giving them permits” suggests Marc Fortin.

”If the Mohawks don’t pay their taxes, we should close the factories” concludes Fran?ois Damphousse.