United States Attorney Benjamin B. Wagner
Eastern District of California
Southern California Defendant Arraigned for Tobacco Tax Fraud
|FOR IMMEDIATE RELEASE||
Wednesday, December 19, 2012
Docket #: 2:12-CR-409 GEB
SACRAMENTO, Calif. — On November 21, 2012, a federal grand jury returned a 19-count indictment charging a married couple with trafficking in contraband smokeless tobacco, United States Attorney Benjamin B. Wagner announced. Nina Nguyen, 35, will be arraigned at 2:00 p.m. today in federal court in Sacramento.
According to court documents, Nguyen and her husband, Luan Tran, 36, both of San Bernardino, used multiple business names and licenses to order approximately $4.4 million in tobacco product from out-of-state distributors over a two-year period. They sold the product in California but did not report the bulk of their transactions, resulting in them defrauding the state of approximately $1.6 million in California excise tax for “other tobacco products” or OTP (any tobacco product other than cigarettes, primarily cigars, chewing tobacco, and leaf tobacco).
Nguyen and Tran went to great lengths to conceal their OTP purchases from the state. They frequently drove more than 1,000 miles one-way to pick up product, rather than having it delivered, in order to avoid any documentation of their purchase. They used multiple fake business names and had product shipped to family members’ residences. When their son moved out and into his paternal grandmother’s house, the defendants had OTP shipped there, and ordered him to stay home from school on days that the shipment was expected, so he could receive the deliveries.
Nguyen and Tran sold the OTP to numerous customers in southern California. Of the $4.4 million in OTP purchased, Nguyen and Tran reported only $219,572 in purchases on their tax returns to the State of California. They claimed that a portion of this figure was exempt from tax because it allegedly had been sold out-of-state.
“This case clearly represents the importance of effective interagency collaboration at the local, state, and federal level,” stated Special Agent in Charge, Joseph M. Riehl, Bureau of Alcohol, Tobacco, Firearms, and Explosives. “ATF will continue our commitment to our community to aggressively investigate and hold accountable those criminals who violate the Contraband Cigarette Trafficking Act.”
“We estimate California is losing upwards of $8 billion dollars in tax revenues to organized criminal enterprises who are undermining our economy, endangering lives of innocent citizens, and deceiving consumers. These arrests demonstrate the benefits of collaborative enforcement efforts toward protecting our citizens and state resources,” said Board of Equalization Chairman Jerome E. Horton.
If convicted, both defendants face a maximum sentence of 20 years in prison and a $250,000 fine for each count. Any actual sentence would be determined at the discretion of the court after consideration of the Federal Sentencing Guidelines, which take into account a number of variables and any applicable statutory sentencing factors. These charges are only allegations and the defendants are presumed innocent until and unless proven guilty beyond a reasonable doubt.
This case is the product of an investigation by a specialized task force comprising 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 $94 million in unstamped tobacco excise taxes to contraband distributors, and approximately $182 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. Attorneys R. Steven Lapham and Lee S. Bickley and California Deputy Attorney General Peter Williams, cross-designated as a Special Assistant U.S. Attorney for purposes of these cases, are prosecuting the case.