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 CEO 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," Montour 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 these days.

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's 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, according to court documents.

But GRE also pays all applicable federal excise taxes to the Canadian government in exchange for the right to make cigarettes -- almost $500 million 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.

"I don't want to be ever on record as saying legal and illegal, because there are a lot of sovereignty issues in tobacco manufacturing as a whole," Montour told the committee.

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)," Montour said. "I had every First Nations member in the community saying, 'Don't sell me out or don't come home.'

"It's very difficult to even speak in front of a committee when in the back of your mind you're thinking, 'Don't sell out your own people. Make sure you give your people the opportunity to go after some of that revenue stream, too. It's all that your people have as a revenue stream,'" Montour told committee members.

"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.

During the course of two long, wide-ranging interviews with The Spectator and in his appearance before the parliamentary committee, Montour used the phrase "level playing field" 13 times.

"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 tells The Spectator. "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 CEO -- 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 lived in east-end Hamilton until recently moving to a sprawling property with a newly-built mansion on the Mountain brow.

In the late 1980s, Montour spent time in jail after being convicted of conspiring to import 37 kilograms of marijuana from Mexico to Canada.

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 American 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.

Although "chose," Montour corrects himself, may not be the most appropriate word.

"That was something that was imposed on us as an alternative to a long, long term of incarceration," Montour says.

There's a hint of anger in his voice, as he notes that GRE is the lone native tobacco manufacturer in Canada forced to pay federal taxes.

"How come I was threatened with 10 years incarceration? It doesn't seem fair, does it?" Montour asks. "They said, 'Well, you had a criminal record when you were a kid.'

"OK. That's your argument? I was in trouble when I was 25 years old. I'm 47.

"So 22 years later, the only step forward they took against native manufacturing on reservation without a licence was mine?" Montour asks.

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. It's not fair to them (unlicensed native manufacturers) if they're legal and they're getting almost portrayed as criminal. It's not fair to the guys that are out there paying the tax (with) nobody else paying it, because they're slowly killing us."

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.

"You can't make cigarettes without glue. 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.

"Just go to the people who make these raw materials and say, 'If you sell to unlicensed manufacturers, you're going to jail,' " Montour says.

"It'll get shut down like that," he adds, with a snap of his fingers.

Montour says all the materials that go into filters, for example, originate from publicly traded companies.

The only use for acetate tow filters is cigarettes.

There is no other reason to sell them.

"Indict a couple of CEOs and watch it stop," Montour says.

Restricting the sale of raw materials would force companies to acknowledge who their customers are.

"If you seize a product and you know it's going to an unlicensed manufacturer and you clearly identify that, then why should it be any different than if you're handling the money for organized crime?" Montour asks.

"If it truly is criminal activity," he adds, "then anyone that's doing this (is) dealing in the proceeds of crime."

Of course, the major component in cigarettes is tobacco, and if the contraband market has reached 10 billion cigarettes a year, as one study suggests, then that's a lot of tobacco that has to come from somewhere.

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."

In 1998, Ontario's tobacco crop amounted to 151 million pounds.

This year, it's estimated to be as low as 17 million pounds, a drop of about 90 per cent in just a decade.

The reason?

The huge increase in contraband combined with legal manufacturers turning to cheaper tobacco from the U.S., Central America, even Brazil.

Linda Vandendriessche is the chair of the Ontario Flue-Cured Tobacco Growers' Marketing Board and she also appeared before the parliamentary committee.

She said that vulnerable farmers are being approached to sell their crop under the table, threatened, or even finding their barns robbed of tobacco bales.

But she strongly disputes Montour's suggestion that her members are fuelling the contraband market.

"We disagree vehemently with the suggestion that most of the illegal tobacco sales issue originates on Ontario farms," Vandendriessche said.

"A farmer who sells illegally is risking almost everything he has under our quota system."

There was one point, however, where she was in full agreement with Montour.

"Times are desperate," she said.

"The lure of fast cash is intensifying."

An in-depth look at cigarettes, contraband and the native connection

DAY 1: 10 billion cigarettes a year

DAY 2: Inside the smoke shacks

DAY 3: Native CEO walks fine line

DAY 4: GRE fights ironic battle in U.S.

'Is that what you want for the youth?'

Six Nations "looks like a war zone right now," according to Jerry Montour, CEO of cigarette manufacturer Grand River Enterprises.

He made the comments in May to a parliamentary committee that's collecting evidence on the growing problem of contraband tobacco.

"Let me give you the mindset of our young people," Montour told the committee.

"Let me give you the mindset of being a young First Nations person going to high school -- leaving your community on a bus, getting to the end of your territory, seeing probably 40 or 50 OPP officers sitting outside the edge of your reserve because of unresolved land issues, and thinking you're going to change your life, you're going to get a job.

"So you go back to your community, but the only opportunities that present good employment on our First Nations territories right now are tobacco-related."

Montour suggested to the committee that young natives working in unlicensed cigarette manufacturing plants on reserves face danger. Much of the problem stems from the confusion over what's legal and what's illegal when it comes to cigarette production.

"Do you want them working in a facility where there are firearms at their feet because they have to fear the raids and they have to fear the aggression?" Montour asked the committee members.

"Because they're desperate for those jobs, they allow themselves to work in those environments. Is that what you want for the youth?

"Aren't they entitled to be working in a manufacturing facility?" Montour asked.

"As long as tobacco is legal and recognized, I think they're entitled to be there."

Montour speaks

* On finding a strategy to fight contraband:

"You know, the (contraband) problem has been ignored for the last 10 years. So to just mount up the RCMP, have them get their infantry ready and go marching into the reserves might not be the best solution in this particular climate ... when you have land disputes and everything going on in Ontario and Quebec."

* On a U.S. cigarette manufacturing executive who said under oath that cigarettes aren't harmful to health:

"I'm not grabbing that (expletive deleted) Bible and saying that. Cigarettes are harmful to your health over the long term."

* On GRE products and off-reserve activity:

"We do not welcome, nor do we encourage, nor do we want any non-native retailing operations off-reservation to occur in any capacity, whether it be a gentleman taking and selling 10 cartons or it be someone selling a thousand cartons out of a store. That's a job for law enforcement. It's dangerous for me to even get involved ..."

* On land claims:

"I think instead of fearing land claim issues, (governments) just have to deal with them. But honestly, between you and I, they'll never do it. It'll just be a continuous circle where the First Nations people will just continue to get frustrated ... You know, you can go out and get a judgment to get natives kicked off your land in about four hours, but you can't get a land claim heard for almost 17 years. That don't seem like justice to me."

Taxes and poverty

Freedom from taxation is at the heart of more native issues beyond contraband tobacco.

Natives who live on a reserve don't pay federal and provincial taxes, GST or tax on employment income earned on-reserve. At Six Nations, they also don't pay any form of tax to the local band government for the operation of the reserve.

"If you compare it to any other municipality, though, it would probably be one of the lowest standards of living in all of North America," said Jerry Montour, CEO of Grand River Enterprises.

He noted that he was once in a federal government building in Ottawa "where they didn't have water for four hours and they cancelled every meeting that was in the government."

By contrast, "we've been under a boil water advisory at Six Nations for I don't know how long," he added.

"We don't have a high school. We don't have sidewalks. We don't have water. We don't have sewers. There's 20,000 people living here."

Montour said there's nothing to stop a band council from introducing its own form of taxation on its citizens, much like a non-native municipality.

"Whether it be traditional or elected council, it's certainly within their rights to impose some kind of taxation in this community," he said. "Now whether they do or whether they're going to get away with it, I don't know."

Adding to the challenge for First Nations people, Montour said, has been the difficulty in owning land on reserves and obtaining mortgages, or borrowing money for businesses located on-reserve.

"Up until 20 years ago, you couldn't borrow money from the bank because you weren't allowed to place mortgages on the houses," he said. "You never really owned your land. Other than to other natives, how could you sell your land?

"You can't seize it either, so are you going to lend on it? If I have a great business opportunity, are you going to lend me $10 million, even if I am the next BlackBerry of Canada?"

The poverty that exists on reserves might be the biggest obstacle to implementing any type of tax, he said.

"I know there's a small pocket of affluent First Nations people but the impoverished First Nations people outweigh them so greatly, it's hard for the band to figure out what to do."

"We still have people on this reserve without plumbing," he said, incredulously. "That's just unheard of in the city, you know that."

STEVE BUIST is a two-time winner of National Newspaper Awards in the investigations category, and was nominated last year for a third NNA, in the politics category. He was also named the Ontario Newspaper Awards' Journalist of the Year in 2004, and has been nominated 18 times for ONAs and won nine times in the past six years.

He recently chronicled the life of a pig in the 13-part Spectator series A Pig's Tale. You can contact Buist at 905-526-3226 or at sbuist@thespec.com.