Idaho couple sentenced for smuggling cigarettes into Washington

SPOKANE, Wash. -- 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 have been sentenced in federal court.

Peter Mahoney and Peggy Mahoney, operators of the Warpath Smoke Shop on the Coeur d'Alene Indian Reservation at Plummer, Idaho, were sentenced Friday in U.S. District Court for trafficking in contraband cigarettes, Assistant U.S. Attorney Tom Rice said Monday.

Peter Mahoney, 54, was sentenced to 33 months in prison after pleading guilty to conspiracy to traffic in contraband cigarettes and money laundering. Peggy Mahoney, 38, was sentenced to six months of home detention and three years of probation after pleading guilty to one count of contraband cigarette trafficking.

As part of their plea agreement, the Mahoneys agreed to forfeit $1.4 million.

The Mahoneys were among five people indicted in September 2004, and a companion racketeering indictment naming some of the same defendants was returned in August 2005.

Federal indictments allege the Warpath Smoke Shop sold wholesale cigarettes to Indian retailers in Washington without reporting those sales to the state to avoid payment of cigarette taxes.

Peggy Mahoney's brother, Mark Van't Hul, 44, of Havre, Mont., also was sentenced Friday to two years probation for his role in the trafficking scheme. Lyle Conway and Shawn Conway, both of Fife, near Tacoma, previously were sentenced to two years probation.

Federal prosecutors alleged Van't Hul would rent a van in Spokane, drive to Plummer, Idaho, and pick up unstamped cigarettes from the Warpath complex.

Van't Hul would then deliver contraband cigarettes to the two Conways and others on the Puyallup Reservation in Western Washington. Van't Hul would then return to Idaho with checks from the retailers which were in payment for the cigarettes.

The indictment alleges that the conspiracy cost Washington as much $7 million in potential cigarette tax revenues.

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.

Trials are pending against the owner of an Okanogan smoke shop and against six Spokane businesses or their owners in similar alleged smuggling schemes, Rice said.