United States Attorney Benjamin B. Wagner
Eastern District of California
Tobacco Distributor Arrested in Orange County
|FOR IMMEDIATE RELEASE||
Thursday, August 29, 2013
Docket #: 2:13-cr-271 JAM
SACRAMENTO, Calif. — Moon Hoon Kim, aka Steve Kim, 52, of Cypress, was arrested yesterday at his home for a scheme to avoid paying excise tax, United States Attorney Benjamin B. Wagner and Alcohol, Tobacco, Firearms, and Explosives Special Agent in Charge Joseph M. Riehl announced.
An indictment, returned by a grand jury on August 13, 2013, and unsealed after his arrest, charges Kim with one count of mail fraud for selling untaxed OTP (Other Tobacco Products — any tobacco product other than cigarettes, primarily cigars, chewing tobacco, and leaf tobacco). Kim is scheduled to be arraigned in Sacramento federal court on September 12, 2013.
This indictment is the product of a series of investigations by a specialized task force comprising the U.S. Attorney’s Office, the California Attorney General’s office, ATF, and the Board of Equalization. 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.
“The concealment of taxable sales of tobacco products from the State of California and evasion of excise tax payments costs the American economy billions of dollars every year,” said ATF Special Agent in Charge Riehl. “This investigation is an excellent example of how federal and local law enforcement agencies can work together to combat a growing national problem. It should serve as a warning to those who consider distributing tobacco products unlawfully.”
“This task force exemplifies how cooperation and collaboration among federal, state, and local agencies can effectively combat our state’s underground economy,” said Board of Equalization Chairman Jerome E. Horton. “Criminal tax evasion costs our state about $8.5 billion annually, and puts legitimate businesses that comply with our state laws at a competitive disadvantage.”
According to the indictment, Kim used multiple business names and licenses to order approximately $37 million in tobacco product from out-of-state distributors over a five-year period. He then sold the product in California primarily through his business Jobber’s Wholesale, but did not report the bulk of those transactions, resulting in the state of California being defrauded of approximately $16 million. According to the indictment, Kim used front companies, set up by others at his direction, to disguise his illegal purchases of untaxed OTP from out-of-state sources. These companies included KS Wholesale in Vernon and Cheap Cig Distributor in Paramount. The indictment also alleges that Kim used Discounted Tobacco in Long Beach as a retail outlet for some of the untaxed OTP that he sold through Jobber’s Wholesale.
If convicted, Kim faces a potential prison sentence of 20 years and substantial fines and restitution. Any sentence, however, would be determined at the discretion of the court after consideration of any applicable statutory factors and the Federal Sentencing Guidelines. The charges are only allegations; the defendant is presumed innocent until and unless proven guilty beyond a reasonable doubt.
In a separate case, on August 29, 2013, Thao “Nina” Nguyen, 35, and Luan Tran, 36, a married couple, each pleaded guilty to one count of conspiracy to commit mail fraud in connection with a similar scheme. In a hearing before United States District Judge Troy L. Nunley, Nguyen and Tran admitted that they used multiple business names and licenses to order approximately $4.4 million in OTP from out-of-state distributors over a two-year period. They then 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.
As in Kim’s case, Nguyen and Tran went to great lengths to conceal their OTP purchases from the state, frequently driving more than 1,000 miles one-way to pick up product, rather than having it delivered, in order to minimize the existence of any documents that could be used as evidence of their purchase of OTP. They used multiple fake business names and had product shipped to family members’ residences.
Nguyen also pleaded guilty to bank fraud arising out of her theft of three checks from an employer in Orange County. Nguyen made the checks payable to cash in a total amount of $13,500, and then used her son’s bank account to deposit the checks and withdraw the cash.
Nguyen and Tran are scheduled to be sentenced on November 14, 2013. Tran faces a maximum statutory penalty of 20 years in prison and Nguyen faces a maximum sentenced of 30 years in prison, as well as substantial fines and restitution. The actual sentences, however, will be determined at the discretion of the court after consideration of any applicable statuary factors and the Federal Sentencing Guidelines.
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.