15 Charged With Tax Evasion of Tens of Millions of Dollars

U.S. Department of Justice
United States Attorney
Eastern District of Californiawww.justice.gov/usao/cae For Immediate Release

August 9, 2010

Benjamin B. Wagner, United States Attorney

Contact: Lauren Horwood
(916) 554-2706
usacae.edcapress@usdoj.gov

15 Charged With Evasion of Tens of Millions of Dollars in State Tobacco Products Excise Tax

Three-Year Investigation of Tobacco Product Distributors Previously Resulted in Four Federal Indictments Charging Six Other Individuals and Two Businesses

SACRAMENTO, Calif. — United States Attorney Benjamin B. Wagner, California Attorney General Jerry Brown, Bureau of Alcohol, Tobacco, Firearms and Explosives Special Agent in Charge Stephen C. Herkins, and California Board of Equalization Vice Chairman Jerome E. Horton, announced today that eight federal indictments had been unsealed charging 15 persons and three businesses with federal offenses relating to schemes to evade California excise taxes on non-cigarette tobacco products. The indictments, the result of a joint three-year investigation by the ATF, the California Board of Equalization (BOE), and a team of federal and state prosecutors, were filed in U.S. District Courts in Sacramento and Los Angeles.

Four earlier federal indictments arising from the same investigation were filed in Sacramento, charging an additional six persons and two businesses. Of those earlier indictments, four defendants have pleaded guilty: Muhammad Inayat (March 26, 2010), Muhammed Malik (December 18, 2009), ISA Chicago Wholesale (March 1, 2010), and Kultar Singh (May 4, 2010).

Cumulatively, the loss to the state of California in unpaid tobacco excise taxes from the conduct charged in the 12 criminal cases filed to date is estimated at more than $35 million (not including penalties and interest). Approximately $1.3 million in tobacco products and other assets have already been ordered forfeited, and civil forfeiture proceedings are pending against another $21.5 million in seized products and other assets.

The schemes charged in the indictments involve the distribution of tobacco products other than cigarettes, such as cigars, chewing tobacco, and leaf tobacco, known as OTP (other tobacco products). The indictments allege that various distributors and wholesalers of OTP, both in California and other states, schemed to defraud the State of California through the use of dummy corporations, false invoicing, and the filing of false excise tax returns.

“This investigation has exposed systematic and widespread tax evasion in the distribution of tobacco products in California,â€