Texas Man Convicted of Money Laundering Conspiracy and Tax Crimes
A Houston, Texas man was convicted by a federal jury yesterday in the U.S. District Court for the Southern District of Texas of two conspiracies and tax crimes, announced Principal Deputy Assistant Attorney General Richard E. Zuckerman of the Justice Department’s Tax Division.
In total, Kenneth J. Coleman, 51, was convicted of nine counts, including conspiracy to commit money laundering, conspiracy to structure currency transactions, corporate tax evasion, filing false tax returns with the IRS and failing to file a tax return with the Internal Revenue Service (IRS). U.S. District Court Senior Judge David Hittner set Coleman’s sentencing for February 2, 2019. Coleman’s co-conspirator, Marcus 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.
The evidence at trial established that Coleman participated in a scheme to facilitate 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 the medications to Green Valley, which then sold the medications to pharmacies as 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 false documents to Green Valley. Evidence at trial showed that Green Valley would withhold payment to Coleman until it received these false pedigrees.
Coleman and 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 $36 million of illicit funds, including over $2 million in more than 230 cash withdrawals made in amounts less than $10,000 in order to evade bank-reporting requirements.
The evidence at trial also established that Coleman evaded assessment and payment of Acacia’s and Four Corner’s income tax liabilities, and that he failed to file an individual tax return for tax year 2011, and filed false individual income tax returns for tax years 2012 and 2013 with the IRS.
Coleman now faces a maximum sentence of 20 years in prison for the money laundering conspiracy and a maximum sentence of five years for the conspiracy to structure currency transactions. Coleman also faces a five-year maximum sentence for each count of tax evasion and a maximum sentence of three years in prison for each count of filing a false tax return. Coleman also faces a term of supervised release, restitution, and monetary penalties.
Principal Deputy Assistant Attorney General Richard E. Zuckerman thanked agents of IRS-Criminal Investigation, the Federal Bureau of Investigation, and the Federal Department of Agriculture, who conducted the investigation, and Trial Attorneys Sean Beaty and Terri-Lei O’Malley of the Tax Division, who are prosecuting the case.
Additional information about the Tax Division’s enforcement efforts can be found on the division’s website.