Cigarette kingpin could be freed from NY jail as Indian reservation tax case goes up in smoke

Smoke shop owner could be freed from NY prison

NEW YORK — One of the state’s most notorious dealers in untaxed cigarettes may soon be freed from prison, thanks to what a judge called a “lack of clarity” in New York laws regulating tobacco sold on Indian reservations.

For six years, Rodney Morrison oversaw his multimillion-dollar tobacco business from behind bars while prosecutors tried to persuade a court that he was a murderer and a racketeer.

Even after a jury held that his operation was a criminal enterprise, Morrison continued to sell millions of cartons of cigarettes from the Poospatuck Reservation on Long Island, sales records show.

“Your husband is on the phone trying to run a business from inside the jail,” he lamented to his wife in one recorded jailhouse call, according to a transcript contained in a court file. In other calls, taped by federal prison officials and obtained by city lawyers, Morrison dictated instructions on what employees should wear and how to position cartons on the shelves.

Morrison’s days of overseeing his affairs from a cell may be ending.

A federal judge who once called the 43-year-old “a cunning individual with dangerous proclivities” tossed out his racketeering conviction for trafficking contraband cigarettes on April 16, saying that too many elements of state laws on reservation tobacco sales were unsettled to prosecute someone for violating the rules.

Combined with earlier acquittals on murder, robbery and arson charges, the ruling potentially clears the way for a homecoming for Morrison, a former cocaine dealer who made a Wall Street-sized fortune after he switched to cigarettes.

Morrison is scheduled to be sentenced Friday on the only remaining count, a gun charge related to a pistol found in his office. He could get up to 10 years, but his legal team said federal guidelines call for him to get no more than five years, three months for the offense — a penalty that would be erased by the six years he has already spent in jail.

“We will expend every effort to get a sentence of time served,” said Daniel Nobel, an attorney on Morrison’s legal team.

Federal prosecutors filed a legal brief Tuesday asking the judge to give Morrison the maximum sentence, citing his past convictions for robbery, drug possession and accidentally killing a 6-year-old boy with a stray shotgun blast.

The filing called him an “utterly remorseless character.”

Morrison’s release would mark the collapse of a rare prosecution of a reservation smoke shop owner amid uncertainty of the legality of a huge chunk of the state’s tobacco market.

Reservation stores sold more than 24 million cartons of cigarettes in 2009, about 1 out of every 3 packs sold in the state. That booming business exists entirely because of the tribes refusal to collect taxes on the sales, allowing them to sell at a huge discount.

State law requires taxes to be paid on any packs not sold to tribe members, but New York suspended attempts to enforce that rule after it prompted unrest on the reservations in the 1990s. The tribes have fiercely resisted attempts to tax cigarettes as an attack on their sovereignty.

That lack of enforcement has left the courts conflicted about whether merchants are still obligated to collect the tax, and whether they can be prosecuted if they don’t.

Federal agents initially zeroed in on Morrison for reasons that had little to do with the dispute. Authorities charged him in 2004 with building his business by terrorizing rivals and having one competitor killed, but jurors ultimately found him not guilty.

His refusal to collect taxes, though, led to a conviction for racketeering conspiracy. The verdict alarmed some tribal leaders because it seemed to signal that every reservation smoke shop owner in the state could be prosecuted for the same offense.

But after two years of appeals, U.S. District Judge Denis R. Hurley wrote that a “lack of clarity” in state law required him to dismiss the criminal case. Hurley had previously ruled that the shops’ sale of untaxed cigarettes was illegal.

The future of Morrison’s cigarette business is uncertain.

Another federal judge, ruling in a civil lawsuit by the city against several shop owners on the Long Island reservation, ordered some retailers last summer to either start collecting taxes, or limit sales only to members of the tribe.

Morrison’s main store, the Peace Pipe smoke shop, was covered by that ruling and has closed its doors.

“It has devastated his business. There is no business right now,” Nobel said.

Lawyers for the city claim Morrison is also part owner of a second shop that continues to operate. They have asked a judge to find him in contempt of court and order sanctions.

Nobel denies that charge, saying that at most, Morrison loaned money to the business.

“There is no way he could run a business from where he is,” he said.

Recordings of Morrison’s prison phone calls, however, appear to show him actively involved in both shops until at least last summer.

“I am in control of basically two companies,” Morrison told a cigarette distributor in a call on Dec. 9, 2008, according to a transcript filed in court by city lawyers.

In another call, he said he spent two hours a day on the phone talking about the business. The recordings reveal Morrison organizing payments, cutting deals to sell new brands, and dispensing countless instructions.

In one call, he dictated that the next cashier his managers hired should be white or black, because he didn’t want an all-Spanish crew. In another, he said that women working in his administrative offices needed to dress like business professionals.

“Everybody should wear a jacket a couple times of week at the minimum,” he said.