Houston Man Sentenced to Thirty Years in Prison for Money Laundering Conspiracy and Tax Crimes Relating to Second-Hand Drug Scheme
A Houston, Texas, man was sentenced today to 360 months in prison for multiple conspiracy and tax charges, announced Principal Deputy Assistant Attorney General Richard E. Zuckerman of the Justice Department’s Tax Division.
On Nov. 14, 2018, a jury convicted Kenneth J. Coleman, 52, of nine counts, including conspiracy to commit money laundering, conspiracy to structure currency transactions, corporate tax evasion, filing false tax returns with the Internal Revenue Service (IRS), and failing to file tax returns.
The evidence at trial established that Coleman facilitated the fraudulent sale of second-hand prescription medications to Utah-based Green Valley Medical Distributors, LLC (Green Valley). Coleman owned Acacia Pharma Distributors Inc. (Acacia) and Four Corner Suppliers Inc. (Four Corner), which purchased bottles of prescription medications from illegitimate sources and then sold them to Green Valley, which then sold the medications to pharmacies as brand-new.
Federal regulation requires wholesale distributors of prescription medications to provide to a buyer a pedigree – a written statement identifying each prior sale, purchase or trade of the drugs being sold that includes the business name and information of all parties to the prior transactions, starting with the manufacturer. Coleman and others acting at his direction created false pedigrees and provided the fraudulent documents to Green Valley. Evidence at trial showed that Green Valley would withhold payment to Coleman until it received these false pedigrees.
Coleman and his co-defendant, Marcus Weathersby, deposited proceeds from the fraudulent sale of these second-hand prescription drugs into Acacia’s and Four Corner’s business bank accounts and used the funds to pay the suppliers of the illicit pharmaceuticals. At trial, the government proved that Weathersby and others acting at Coleman’s direction laundered more than $41.5 million of illicit funds, including over $2.9 million in more than 230 cash withdrawals made in amounts less than $10,000, in order to evade bank-reporting requirements.
Coleman also evaded the assessment and payment of Acacia’s and Four Corner’s income tax liabilities, failed to file an individual tax return for tax year 2011, failed to file corporate income tax returns for tax years 2011 and 2012, and filed false individual income tax returns for the tax years 2012 and 2013. The combined loss of corporate and individual income taxes was more than $700,000.
Coleman’s co-defendant, Weathersby, formerly of Houston, Texas, pleaded guilty to conspiracy to commit money laundering and was sentenced in June 2018 to 58 months in prison. He testified at trial against Coleman.
In addition to the term of imprisonment imposed, U.S. District Court Judge David Hittner ordered Coleman to serve three years of supervised release, imposed a criminal forfeiture money judgment of $20,326,464.17, and ordered Coleman to pay $716,986 in restitution to the Internal Revenue Service.
Principal Deputy Assistant Attorney General Richard E. Zuckerman thanked agents of IRS-Criminal Investigation, the Federal Bureau of Investigation, and the Food and Drug Administration-Criminal Investigation, who conducted the investigation, and Trial Attorneys Sean Beaty and Terri-Lei O’Malley of the Tax Division, who prosecuted the case. Principal Deputy Assistant Attorney General Zuckerman also thanked U.S. Attorney Ryan K. Patrick of the Southern District of Texas and his office for their assistance in this matter.
Additional information about the Tax Division’s enforcement efforts can be found on the division’s website.