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Feds: Smoke shop owner owes $50M to feds, state, NYC

Federal prosecutors estimate that Poospatuck Reservation cigarette magnate Rodney Morrison owes more than $50 million to the federal and state governments and to New York City from bulk sales of untaxed cigarettes and the operation of his business on the Mastic reservation, according to documents filed in federal court in Central Islip.

The estimate, for the years 1996 through 2004, surfaced when Morrison's sentencing Friday was delayed after state, county and city officials asked U.S. District Judge Denis Hurley to consider ordering restitution for the tens of millions of dollars in taxes they believe the government entities lost due to Morrison's bootlegging operation.

The city, in a separate document filed in the case, estimated Morrison's Peace Pipe Smoke Shop owes it $5.4 million a year on sales of untaxed cigarettes sold over the Internet alone.

Hurley agreed to consider the requests and postponed Morrison's sentencing until next month. The judge had planned Friday to sentence Morrison for his 2008 conviction for running a massive cigarette bootlegging operation and for having illegal possession of a weapon. In the case, Morrison was acquitted of charges of murder, arson and robbery.

Richard Levitt, Morrison's attorney, said his client disputes the government's estimate of more than $50 million and plans to file papers opposing the restitution request. Morrison has long argued his business has no obligation to collect taxes on cigarette sales because it is located on sovereign Indian land.

Federal prosecutors James Miskiewicz and John Durham declined to comment.

Morrison has been held without bail since his arrest five years ago. Even after his acquittal on murder charges in the slaying of a rival cigarette dealer, Hurley denied Morrison bail, saying he considered him too dangerous to be let out of prison.

The city's estimate of a $5.4-million annual tax loss from Internet cigarette sales was determined on the basis of "very limited records" that it obtained as part of a separate civil action, Assistant Corporation Counsel Eric Proshansky wrote to Hurley.

Proshansky did not ask the judge to immediately set an amount of restitution, but only to order restitution in an amount to be determined later.

New York State and Suffolk County officials asked Hurley for similar orders of restitution.

Federal prosecutors have argued that the judge should sentence Morrison to the maximum 30 years, and take into account the murder and assault charges of which he was acquitted. A judge can do so because a criminal conviction is based on the standard of proof beyond a reasonable doubt, while sentencing can be based on a standard involving a preponderance of the evidence.

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