A different view on tobacco trade

Native manufacturer of cigarettes says he's demonized by his own people for paying taxes

July 22, 2008

Steve Buist Record news services

Jerry Montour spits out the word in a mocking tone, the same mocking tone he hears directed at him by his own people:

"Sellout."

That's what other natives call Montour, the chief executive of Ohsweken-based Grand River Enterprises, one of the three largest cigarette manufacturers in Canada.

A sellout.

"And you know what? I am. I very clearly am," he adds. "It's hurtful but it's truthful.

"But I'm committed, and I always will be, to putting jobs on reservation and making it a better place than when we started here," he says. "Can everybody say that?"

Jerry Montour is a conflicted man.

He's a native himself, a member of the Wahta Mohawk reserve near Bala, in the middle of cottage country. He also runs Grand River Enterprises, a native-owned, native-operated company located on native land, smack in the heart of Six Nations, that is the reserve's largest employer.

The company employed about 300 people in 2006 and GRE's gross sales in 2004 were more than $200 million.

But GRE also pays all applicable federal excise taxes to the Canadian government in exchange for the right to make cigarettes -- almost $500 million so far, since the company became licensed in 1996.

On top of that, GRE has paid another $300 million to U.S. governments for cigarettes sold south of the border.

It's a thorny issue for First Nations people, who have long claimed a right to freedom from taxation. The company's decision to pay taxes hasn't been welcomed with open arms by other natives.

To some, it makes Montour and GRE sellouts. Some of the smoke shacks that dot Six Nations refuse to sell GRE products because of the taxation issue. Other native tobacco manufacturers treat him with scorn.

"Oh, they constantly harass me," Montour says. "You have to understand that I'm almost demonized because I choose to go the federal tax route."

But that's only part of the conflict Montour now faces. Contraband cigarettes have become a massive problem for people coming at the issue from many different sides -- law enforcement agencies, federal and provincial governments, legal cigarette makers and First Nations territories.

It's estimated that almost one of every three cigarettes now smoked in Ontario and Quebec is contraband. Non-natives can drive to Six Nations and easily purchase carton-sized bags of cigarettes for as little as $6 or $8, compared to the $75 to $85 it costs for a legal carton that includes all proper taxes.

An overwhelming majority of the contraband smokes -- more than 90 per cent, it's estimated -- originate on First Nations territories.

The RCMP has identified nearly two dozen unlicensed cigarette manufacturing facilities at Akwesasne, near Cornwall, and Kahnawake, near Montreal, as well as another seven unlicensed sites at Six Nations -- the very same place where GRE operates legally.

You can see Montour's dilemma.

Contraband tobacco -- most of it originating on native reserves -- is crushing Grand River Enterprises, itself a native-owned and operated business that pays taxes and produces cigarettes legally in the eyes of the federal government.

In May, Montour even went to Ottawa and appeared before a standing parliamentary committee on public safety and national security, which has been gathering testimony about the contraband tobacco problem for the past two months.

His conflict was clear.

Montour knows he must walk a fine line between protecting his business and protecting the interests of other natives, some of whom rely on the production and distribution of contraband smokes for employment.

"I can remember coming up to this same building (years ago). I had every First Nations member in the community saying, 'Don't sell me out or don't come home.' By the same token, as a First Nations businessman, am I not entitled to a level playing field? Am I not entitled to play under the same rules as everybody else?"

A level playing field.

Over and over, it's a theme that rises to the surface with Montour as he talks about the contraband tobacco issue.

"As a First Nations person, I'm not trying to decide who has jurisdiction, who should be paying tax, who shouldn't be paying tax," Montour said. "All I know is that we have been a compliant manufacturer all the way through this and there's just an unlevel playing field.

"It's pretty tough to compete with a $6 bag, right?" notes Montour, adding that contraband has cut GRE's Canadian business by more than 50 per cent. "Who's right, who's wrong, who has the ability to tax, all of those questions that keep coming up, I don't know why that would be a question for a business to answer.

"As a business I just say, 'What are the rules?' On reserve, the federal government says all applicable federal taxes are due. OK, well, I pay them. Would you pay more than $400 million if nobody else paid nothing?" Montour asks. "For how long would you do it?"

If it's determined that GRE doesn't need to pay taxes, then the solution is simple, he adds.

"If it's not owed, then cut me a cheque and 'I'll f--- off."

On that May day in Ottawa, Montour appeared before the parliamentary committee alongside another cigarette company chief executive -- Benjamin Kemball, president of Imperial Tobacco.

The two men arrived at their respective positions from far different backgrounds.

Kemball is British-born and earned a degree in biochemistry from the University of Bristol. He joined British American Tobacco, the parent company of Imperial Tobacco, in 1979, and has worked for BAT around the world.

Montour, a Wahta Mohawk, lived in east-end Hamilton until recently moving to a sprawling property with a newly built mansion on the Mountain brow.

Montour and Ken Hill, a Six Nations Mohawk, got involved in the cigarette business in 1992 when they entered into a joint venture with another native who lived on the Akwesasne reserve. Together, they financed the construction of a cigarette manufacturing facility on the U.S. side of Akwesasne where they could begin producing their own brands.

Based on their early success at Akwesasne, Montour and Hill decided to build the much larger Grand River Enterprises cigarette plant at Six Nations.

Weary of being pursued and fined by the government over unpaid excise taxes, GRE chose to acquire a tobacco licence in 1996 and pay all applicable federal taxes.

So how do you get a level playing field? Montour is asked.

"Somebody has to lay out the format for operating a business on reservation," he says. "If the federal government feels they have the jurisdiction to do it, OK, where are your guidelines and why are they not enforced?

"I just don't see right now a sense of fairness to anybody."

There is a solution to the contraband tobacco problem, Montour says.

A very simple solution that doesn't distinguish between native and non-native cigarette manufacturers.

Restrict the sale of raw materials to licensed manufacturers only, Montour argues, and the contraband problem will dry up.

"All I know is that if we run out of glue, I have to shut down," Montour said. "If I run out of filters, I have to shut down."

The sale of raw tobacco is already controlled through the Ontario Flue-Cured Tobacco Growers' Marketing Board. It can only be purchased legally by a licensed manufacturer.

But the other specialized products that make up a cigarette -- low-ignition rolling paper, the brown cork tipping paper at the end and, most importantly, the acetate tow filter -- can be purchased by anyone.

Montour says it would be easy for Canada and the U.S. to make it illegal for a company to sell those raw materials to anyone but a licensed manufacturer.

Montour and Kemball, his Imperial counterpart, have very different ideas concerning the source of the contraband raw tobacco.

Kemball told the parliamentary committee that the vast majority of raw tobacco used in the illegal production of cigarettes originates in North and South Carolina and Virginia.

Montour, on the other hand, believes that a significant amount of the raw tobacco -- up to 80 per cent, he claims -- is coming from southwestern Ontario's traditional tobacco belt, which stretches from Simcoe to Tillsonburg.

Sometimes, he suggested, truckloads of raw leaf tobacco will arrive in the middle of the night, there's a sale handled in cash, and the trucks move on.

"A lot of these farmers are in really, really dire straits right now," Montour told the committee members. Right now, they're a bit more easy victims of prey from organized crime because they're destitute."

******************** Let's see ... Indigenous people need to earn a living, and they are legally exempt from taxes, and they need tobacco. Tobacco farmers need to earn a living, and they can't sell their tobacco, and they are not 'allowed' to sell it to Indigenous people. GRE caved to pressure. GRE still grossed over $200m. So the GRE 'level playing field is ... what? Voluntarily, tobacco farmers and ordinary people give up their inherent rights and their livelihood for the GRE MONOPOLY? :rolling eyes: ... and fade to the small violin ...