Tobacco News and Interesting Information

Four former leaders of the Stillaguamish Indian Tribe must pay more than $25 million to Washington state that should have been charged as taxes on cigarettes sold at the Blue Stilly Smoke Shop in Arlington.

Edward Goodridge, Sr., his wife Linda and their son Eddie Goodridge Jr. pleaded guilty Thursday to trafficking contraband cigarettes and engaging in transactions involving money and property derived from unlawful activity, all federal felonies.

Sara Schroedl, a cousin of the Goodridges, also pleaded guilty to the charges.

All four tribal members signed plea agreements Thursday, which they've been negotiating since May 2007, when armed federal agents raided the smoke shop, homes of the Goodridge family, and one location in Oregon where cigarettes were stored.

None of the 5.3 million cigarettes found that day bore a state tax stamp, which is how vendors show that taxes have been paid. The four tribal members made at least $55 million selling tax-free cigarettes between March 2003 and May 2007 at the Blue Stilly, where smokers found tobacco products for half the price of the same products sold at shops that charged the state tax.

Schroedl and the Goodridges are scheduled to be sentenced in March. They each face up to 11/2 years in prison.

Eddie Goodridge Jr., 33, was "relieved of his duties" as the tribe's executive director about a week ago said Steven Ungar, a lawyer for the tribe. Edward Goodridge, 60, also stepped down from his position as a member of the tribe's Enterprise Board. The elder Goodridge was a longtime tribal leader who once served as chairman.

Schroedl, 40, said she served on the tribe's leadership council for six years, until sometime in 2003.

The tribal board, led by Chairman Shawn Yanity, hired Ungar a little more than a week ago to sort through the tribe's financial affairs.

"I'm coming in to do a truly objective evaluation of governance and finances," he said. Ungar added that the tribe is cooperating with federal agents in an ongoing investigation, but didn't offer details.

He said he doesn't know why Yanity and other tribal leaders didn't take action sooner regarding untaxed cigarette sales at the Blue Stilly Smoke Shop.

The Goodridges and Schroedl still own and operate the smoke shop, which sits on land they lease from the Stillaguamish tribe. It's not clear whether the tribe will try to end the lease agreement early, Ungar said.

The lease is valid until March, Schroedl said.

U.S. District Court Judge James Robart on Thursday repeatedly asked each defendant whether they fully understood what would happen if they were to plead guilty to the charges, and whether they had each had enough time to consider their options. All four said they understood and that they'd had plenty of time to decide what to do.

Edward Goodridge went first.

"Guilty," he said.

When their turns came, his wife and son pleaded the same. Then Schroedl pleaded guilty.

The Goodridge family members declined to comment after the plea hearing.

Schroedl said later that tribal sovereignty is impaired when the federal government forces tribes to observe state tax laws.

"My grandmother fought for these rights," she said.

Schroedl said the Goodridge family asked her and her husband, Dan, who is not a tribal member, in March 2003 if they wanted to invest in the smoke shop. The smoke shop had been run for several years by Stormmy Paul, a Tulalip tribal member, but the Goodridge family told Paul to leave about the same time that they asked Schroedl to become a partner in the business.

The smoke shop was raided in 2001, when it was under Paul's operation. Paul was convicted late last year of running a cigarette smuggling ring that stretched between South America, Asia and his home on the Tulalip Indian Reservation. He's currently serving a one-year sentence of home detention.

Schroedl said she and her husband took out a second mortgage on their Stanwood home and gave $70,000 to the Goodridges to run the smoke shop.

"It was everything we had," Dan Schroedl said. "It was an investment."

Over the next four years, the Schroedl's took in $5 million in cash, according to court documents -- enough to move to Arizona, then to Hawaii, where they currently live.

"We paid income tax on everything," he said, adding that those payments amounted to about 35 percent of their income.

Schroedl said she believed at the time that the business model was legitimate, and felt that the $5 million she made over four years was a sign that the smoke shop was wildly successful. Still, she said, American Indians should have the right to operate businesses however they choose on tribal land.

She said she pleaded guilty hoping to avoid jail time and move on with her life.

"I have children to protect," she said.

The Blue Stilly Smoke Shop closed only briefly after the 2007 raid, and has been open ever since. The Stillaguamish Indian Tribe earlier this year negotiated a cigarette compact with the state that includes a tax. The tax boosts the price of the cigarettes so the Blue Stilly doesn't undercut other smoke shops that charge state tax. The compact allows the tribe to keep the money made from the tax.

Schroedl said she is still 33 percent owner of the smoke shop.

Federal prosecutors have in recent years cracked down on cigarette smuggling and tax-avoidance schemes on Indian reservations. Tribes are required to sign compacts with state officials, but state attorneys can't prosecute tribal issues because tribes are sovereign and deal directly with the federal government.

Indians already are exempt from paying state taxes when they engage in trade with one another on Indian land, but cigarettes sold to non-Indians must be taxed. The Contraband Cigarette Trafficking Act in 2003 tightened the threshold for federal smuggling charges from 300 untaxed cartons to just 50 untaxed cartons.

Since then, federal agents have been sweeping through reservations in the Pacific Northwest and throughout the country to catch tribal members selling untaxed cigarettes.