Lance Morgan, the president and chief executive officer of Ho-Chunk Inc., the Winnebago Tribe's economic development corporation, speaks at Arizona State University's Wiring the Rez conference on the Gila River Indian Community in Arizona on February 1, 2019. Photo by Indianz.Com (CC BY-NC-SA 4.0)

Winnebago Tribe still fighting back a year after raid on reservation

By Kevin Abourezk

More than a year has passed since federal agents raided the Winnebago Reservation in Nebraska in what tribal leaders have called on attack on their sovereignty.

On January 30, 2018, nearly 50 agents from the Bureau of Alcohol, Tobacco and Firearms converged on the offices of Ho-Chunk Inc., the Winnebago Tribe’s economic development corporation. They confiscated almost $1.5 million worth of cigarettes owned by the company.

Over the past year, there have been few developments in the ongoing legal dispute between the Winnebago Tribe and the federal agency that seized the tobacco products and records related to its tobacco manufacturing business. The dispute began in 2016 when the ATF notified the company that it was seeking tobacco records from the tribe as required by the Contraband Cigarette Trafficking Act.

The tribe responded, saying it wasn’t subject to the federal law. However, last July, nearly six months after the raid on Ho-Chunk Inc.’s offices, the D.C. Circuit Court of Appeals ruled against the tribe, saying tribal businesses must comply with the recordkeeping requirements of the federal law.

Federal agents in unmarked black sports utility vehicles can be seen parked at the headquarters of Ho-Chunk Inc. on the Winnebago Reservation in Nebraska on January 30, 2018. Photo by Kevin Abourezk

Following the ruling, the U.S. Attorney’s Office for the District of Nebraska filed a complaint in federal court seeking forfeiture of the confiscated cigarettes, as well as a Dodge Ram truck, Freightliner box truck and forklift. In the complaint, federal authorities alleged Ho-Chunk Inc. and its subsidiaries had violated federal tobacco laws by shipping and selling “untaxed, unstamped cigarettes to businesses in Nebraska other states.”

"Not much has happened since then, but the court said the feds could sell the tobacco at an auction and put the money in escrow,” said Lance Morgan, the president and CEO of Ho-Chunk Inc., in a post on Facebook last week.

He said the advertisement published for the tobacco auction indicated all taxes on the cigarettes have been paid. Indeed, Morgan said, nearly $900,000 of the value of the confiscated cigarettes relates to federal taxes that Ho-Chunk Inc. paid for them.

“I can’t help but wonder how many houses for our people that money could have helped build,” he said in his post. “We have a great legal team and I told them yesterday that I want to win. They said that would be hard, so I explained that surviving is how we define victory when dealing with the government.”

Morgan, who is a Winnebago tribal citizen, also posted a video from inside his company’s tobacco production facility with the caption: “Still here!"

Despite the actions, federal authorities have not charged anyone at Winnebago with actual crimes.

UPDATE – Judge to rule whether Tribal lawsuit against Nebraska proceeds to trial. Following arguments presented Monday (Dec. 10), a Federal judge in Omaha, Neb., will decide if a lawsuit challenging the State of Nebraska's attempts to regulate business activity on Native American reservations may proceed to trial. The hearing was on a motion by the State of Nebraska to dismiss the case HCI Distribution, Inc. v. State of Nebraska. A ruling whether the suit may proceed to trial is anticipated by the end of December. “Native Americans want to provide for themselves and determine their destiny as a people. The state’s regulatory overreach disrespects our sovereignty and violates established federal Indian law,” said Nicole Ducheneaux, an attorney representing HCI Distribution, Inc. and Rock River Manufacturing, Inc. The two companies are subsidiaries of Ho-Chunk, Inc., the Winnebago Tribe of Nebraska’s award-winning economic development corporation. The Tribe is seeking a judicial determination of these issues despite state and Federal Government efforts to halt the case. If the case is dismissed, the Tribe will likely appeal to the United States Court of Appeals for the Eighth Circuit. A 20-year dispute with Nebraska came into sharp focus early 2018 with a search of Ho-Chunk, Inc. locations conducted by the federal Bureau of Alcohol, Tobacco, Firearms and Explosives. The tribal companies targeted manufacture and distribute tobacco products. Ho-Chunk, Inc.’s companies filed the suit in April 2018, detailing how big tobacco companies are using their financial power to coerce state governments to unlawfully target Native American tribes or lose millions in settlement funds. Tribes were not part of the historic 1998 Master Settlement Agreement in which major tobacco companies agreed to pay damages to states, nor are tribes subject to state regulation under federal law. Big Tobacco has withheld millions in settlement payments from other states for failing to enforce MSA laws on sovereign tribal nations. Nebraska’s MSA payment was $37.7 million in 2017. The tobacco trade is crucial to Winnebago and many other tribal economies by providing employment and funding programs for cultural and social advancement.

Posted by Ho-Chunk, Inc. on Tuesday, December 11, 2018
Ho-Chunk Inc on Facebook: 'Native Americans want to provide for themselves and determine their destiny as a people'

Meanwhile, Ho-Chunk Inc. has begun its own legal action to try to prevent further encroachment on its tobacco manufacturing and distribution enterprises.

On April 20, 2018, the company sued the state of Nebraska on behalf of two of its subsidiaries – HCI Distribution and Rock River Manufacturing – seeking to prevent the state from forcing them to abide by a legal agreement between the state and a variety of tobacco manufacturers.

HCI Distribution purchases tobacco products from tribal-based manufacturers and resells those products exclusively to reservation-based wholesalers and retailers. Rock River is a federally licensed cigarette manufacturer whose products are distributed by HCI Distribution and other national distributors to retailers throughout the country.

The lawsuit, filed before the U.S. District Court for the District of Nebraska in Omaha, alleges the state’s efforts to force the two corporations to abide by an agreement between the state and several major tobacco manufacturers constitutes an attack on the tribe’s status as a sovereign nation.

The lawsuit alleges the state of Nebraska has sought to force the Winnebago Tribe to participate in a 1998 settlement between the four largest tobacco manufacturing companies and 46 states, which had sued those tobacco companies in order to recover healthcare costs related to smoking. The resulting legal agreement, known as the Tobacco Master Settlement Agreement (MSA), required the tobacco giants to make payments to the states each year.

States that fail to force all tobacco manufacturers that operate within their borders to either participate in the agreement or begin paying fees in order to sell cigarettes in the state face losing their sizeable settlement payments. For Nebraska alone, that payment was $37.7 million in 2017.

However, neither states’ attorney generals nor the big tobacco companies invited tribes to participate in the MSA, and they also failed to seek the involvement of Congress, which exercises “exclusive and plenary control over sovereign tribes within its borders independent of state jurisdiction,” according to the lawsuit.

“For 20 years, we’ve been fighting this,” Morgan said Friday at the Wiring The Rez conference held on the homelands of the Gila River Indian Community in Arizona. “If they had just asked us in 1998, maybe we could have avoided this.”

Nicole Ducheneaux, an attorney for Ho-Chunk Inc., has said the lawsuit by HCI Distribution and Rock River Manufacturing is focused on trying to prevent the state from forcing them to abide by the Master Settlement Agreement and isn’t directly relate to the ATF raid last year.

On December 19, a federal judge ruled against the state of Nebraska’s motion to dismiss the company’s lawsuit, allowing the lawsuit to proceed.

Ho-Chunk Inc. owns Indianz.Com. The website is not involved with the tobacco operations or the activities at issue in the lawsuit.

D.C. Circuit Court of Appeals Decision
Ho-Chunk, Inc. v. Sessions (July 3, 2018)

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