United States Attorney Benjamin B. Wagner
Eastern District of California
TWO MORE LOS ANGELES TOBACCO DISTRIBUTORS ARE SENTENCED TO PRISON FOR EXCISE TAX FRAUD
|FOR IMMEDIATE RELEASE||
CONTACT: Lauren Horwood
Tuesday, July 17, 2012
Docket #: CR S 10-259 JAM
SACRAMENTO, Calif. — Atif Henan, 59, of Los Angeles, and Samy Girgis, 60, of Norwalk, were sentenced today by United States District Judge John A. Mendez to 27 months and 21 months in prison respectively for their roles in a scheme to defraud the State of California of more than $1 million in state tobacco excise taxes, United States Attorney Benjamin B. Wagner and California Attorney General Kamala D. Harris announced.
Although Judge Mendez ordered a restitution hearing for August 28, 2012, the parties advised the court that it was likely that the an agreement would be reached prior to that hearing for the defendants to pay in excess of $900,000 in restitution to the State of California to make up for the excise tax that was not paid as a result of the scheme.
Henan and Girgis both pleaded guilty to committing mail fraud on January 31, 2012. According to their plea agreements, Henan, Girgis and Atef Shehata were partners in Classic Wholesale, a licensed tobacco distributorship in Los Angeles. (Shehata has also pleaded guilty to mail fraud and is scheduled to be sentenced on September 18, 2012). Classic Tobacco and its successor entity House of Tobacco ordered and received approximately $2.5 million in untaxed tobacco products from a Las Vegas tobacco distributor. In order to avoid a paper trail that law enforcement might use to unravel the scheme, the distributor used a phony company name on the invoices and shipping records. The product was then shipped to a trucking terminal in Los Angeles instead of the defendants’ actual place of business. In a further effort to disguise this illegal activity, Classic Tobacco/House of Tobacco did report and pay tax on a small portion of the tobacco products that it received to make it appear that it was complying with the law, however, the great majority of the shipments went unreported. In this way the defendants evaded nearly $1 million in excise taxes that was owed to the State.
“ATF is proud to have a leadership role in this task force,” stated Acting Special Agent in Charge John Lee. “The expertise of each participating agency is critical in the success of our investigation and prosecution of these cases, and has led to over $17 million being returned to the State of California to date.”
California tobacco distributors of unstamped tobacco (like cigars and chewing tobacco) must report in-state sales monthly to the Bureau of Equalization (BOE) and pay approximately 46 percent of the wholesale price in excise taxes.
These cases are the product of investigations by a specialized task force consisting of the U.S. Attorney’s Office, the California Attorney General’s office, the ATF, and the BOE. For the last several years, these offices have supported a task force dedicated to combating the systemic problem of tobacco excise tax evasion in California. In 2007, the BOE estimated that the state lost approximately $90 million in unstamped tobacco excise taxes to contraband distributors, and approximately $120 million in excise taxes for taxed stamped tobacco like cigarettes. Because California has a relatively high tobacco excise tax rate, it is a frequent target for contraband tobacco smugglers and tax evaders. Assistant U.S. Attorney R. Steven Lapham and California Deputy Attorney General Peter Williams, cross-designated as a Special Assistant U.S. Attorney for purposes of these cases, are prosecuting the cases.
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