AUBURN - A felony investigation into two Cayuga Nation-owned businesses accused of felony tax evasion will continue after a judge ruled on Tuesday that sheriff's deputies in Cayuga and Seneca counties legally raided the stores on Nov. 25.

After deputies seized nearly 3.5 million untaxed cigarettes, lawyers representing the tribe filed a lawsuit against the district attorneys and sheriffs in both counties, arguing the raid violated the tribe's sovereign nation status, that there were no enforceable tax laws to support a criminal investigation and that any seized evidence had to be returned.

But in a written decision, state Supreme Court Judge Kenneth Fisher, who signed the search warrant used in the raids, said the two Lake Side Trading convenience stores located in Union Springs and Seneca Falls were not located on a recognized reservation and that the businesses could be held accountable for violating state excise tax laws.

While the tribe will appeal the decision, Cayuga County District Attorney Jon Budelmann and Seneca County District Attorney Richard Swinehart said the ruling allowed them to pursue a felony indictment.

“The evidence is all collected and the analysis is all done,” Budelmann said. “I intend to present the matter to the Cayuga County grand jury ... Ultimately it will be in the grand jury's hands.”

In an e-mail, Dan French, an attorney for the tribe, said he was surprised by the decision and believed it went against several state and federal laws.

“The Cayuga Nation believes that the court's unprecedented decision is squarely at odds with both state and federal law, and the nation intends to seek a review in the appellate courts,” French said. “In the meantime, the nation intends to comply with today's decision while it seeks to vindicate its rights on appeal.”

The tribe, along with other Indian nations in New York, have claimed they are exempt from collecting sales and excise taxes on their property because their businesses are protected by their sovereign nation status.

But Budelmann said he believed the ruling would stand if it went to appeal.

“This is a 30-page, well-written and researched decision,” Budelmann said. “I really don't see it being overturned. It goes along with several other federal and state court rulings regarding this issue.”

In his decision, Fisher said that while state tax laws did recognize the Cayuga Nation as a tax exempt tribe, they didn't recognize any Cayuga-owned reservations.

Even though the land that the two businesses are located on are owned by the nation, Fisher also said they were not exempt from tax laws or recognized as a reservation because they were purchased from private individuals on the open market.

“Granting the relief demanded by the Indian Nation would upset New York's long exercised sovereignty over the area, creating a checkerboard of alternating state and tribal jurisdiction in New York state (that) would seriously burden the administration of state and local governments and would adversely effect landowners neighboring the tribal patches,” Fisher said.

Fisher also ruled that the state's inaction to enforce tax laws did not mean those laws could not be enforced by local district attorneys.

When oral arguments on the legality of the raid were heard in a Cayuga County courtroom on Dec. 3, Budelmann said he saw district attorneys from several other counties that have been dealing with tax issues with their local tribes.

With several counties calling him to find out what they need to do to investigate their local tribes, Cayuga County Sheriff David Gould said he attributed the successful raids in Cayuga and Seneca counties to the cooperation between all of the involved law enforcement agencies.

But despite the success of the raids and the support from a court ruling, Budelmann and Swinehart said their work was just beginning.

“It's far from over; it's just the beginning quite frankly,” he said. “We are now just past the search and seizure stage.”

Staff writer Nate Robson can be reached at 253-5311 ext. 248 or nathan.robson@lee.net