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South Carolina man sentenced to six years in prison for tobacco scheme

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A South Carolina man was sentenced Monday in U.S. District Court, Syracuse, to six years in federal prison for participating in a conspiracy to manufacture 500 million untaxed cigarettes on the Akwesasne Mohawk Reservation and then smuggle them into Canada.

William D. Humphries, 67, Lake City, S.C., also was ordered to pay a $7 million judgment and undergo three additional years of supervision upon his release from prison. This comes after being convicted in November of 44 felony counts, including interstate travel in aid of racketeering, a wire fraud conspiracy to defraud Canada of tax revenue, a conspiracy for the unlawful manufacture of tobacco products and money laundering.

According to the U.S. attorney’s office, Mr. Humphries, a tobacco broker and wholesaler, conspired with others on the reservation to defraud Canada of tax revenue from 2005 to 2006. In 2005, Mr. Humphries began working with an unspecified major manufacturer of cigarettes that was operating on the reservation without a federally required bond and permit. Mr. Humphries provided “Canadian Blend” cut-rag tobacco and cigarette-making supplies to the unlicensed manufacturer. This tobacco was used to manufacture cigarettes and subsequently taken into Canada without the payment of required Canadian taxes.

From the summer of 2005 to May 2006, Mr. Humphries supplied the unlicensed manufacturer with about one load of cut-rag tobacco per week, prosecutors said. In all, Mr. Humphries supplied about 44 loads of tobacco, with each load producing 13.2 million contraband cigarettes, causing a $40 million tax loss to Canada.

Prosecutors said the unlicensed manufacturer also was engaged in a conspiracy to distribute marijuana smuggled in from Canada and then distributed throughout the United States. The proceeds of that marijuana distribution were used to fund the cigarette smuggling conspiracy, which used the same smuggling routes used to bring marijuana into the United States from Canada.

In February 2006, after delivering a load of tobacco to the unlicensed manufacturer on the reservation, Mr. Humphries was stopped on the reservation for a traffic infraction. Law enforcement seized about $88,000 in American currency paid to Mr. Humphries for the sale of tobacco. A narcotics-detection canine alerted to the currency and officers were able to smell marijuana on the money. At trial, witness testimony established that the money found on Mr. Humphries was the proceeds from marijuana distribution, according to prosecutors.

In May 2006, the unlicensed manufacturers dealing with Mr. Humphries were arrested on federal marijuana charges and thereafter cooperated with prosecutors. However, Mr. Humphries continued to sell tobacco and cigarette-making supplies to other unlicensed cigarette manufacturers on the reservation. He continued to receive payments in the form of proceeds of marijuana sales from unlicensed manufacturers to whom he had sold Canadian blend tobacco and supplies, prosecutors said.

In an attempt to disguise the source of the money, which prosecutors said were criminal proceeds, Mr. Humphries began taking substantial sums of American money to the Mohawk Bingo Palace on the reservation. In recorded conservations with a government informant, which were played for the jury, Mr. Humphries was heard explaining that he was inserting large sums of cash into electronic bingo machines and then repeatedly cashing out at the cashier’s window in an attempt to remove the smell of marijuana from the money he retained.

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