United States District Court Orders Convicted Cigarette Tax Evaders To Pay Municipality Of Anchorage Over Two Million Dollars In Restitution
Anchorage, Alaska - U.S. Attorney Karen L. Loeffler announced today that United States District Court Judge Sharon L. Gleason ordered Michael Butler, 44, along with Sun Sims, 52, Kyong Hee Kim, 57, Jae Ho Lee, 60, Jae Gak Lee, 62, and Jerry Lee, 60, to pay a total of $2,007, 250, plus interest, in restitution to the Municipality of Anchorage following their convictions on charges that they were participants in a conspiracy to defraud the Municipality of Anchorage (MOA) by evading the payment of cigarette excise tax. The conspirators were indicted on July 18, 2013, on charges including mail fraud, conspiracy to commit money laundering, and conspiracy to make false statements regarding the distribution of cigarettes. Kyong Hee Kim, Sun Sims, Kimberly Sims, Jae Ho Lee, Jae Gak Lee, and Jerry Lee previously pleaded guilty in U.S. District Court for their roles in the conspiracy and other criminal violations. Michael Butler was convicted at trial in November 2014.
According to the court documents, Michael Butler and Sun Sims operated and managed Up in Smoke, located in the MOA, and Golden Eagle Tobacco and Longmere Lake Grocery and Liquor, both located outside the MOA. Because they owned Golden Eagle Tobacco and Longmere Lake Grocery and Liquor, Butler and Sims could legitimately purchase MOA excise tax exempt cigarettes from tobacco wholesale distributors located in the MOA, but only if those cigarettes were actually transported outside of the MOA and offered for sale at those two stores. However, cigarettes that they purchased within the MOA and intended to sell at Up in Smoke or distribute to others within the MOA were not excise tax exempt.
Between 2009 and October 10, 2012, Michael Butler and Sun Sims used their Golden Eagle Tobacco and Longmere Lake Grocery and Liquor store accounts with tobacco wholesale distributors within the MOA to purchase excise tax exempt cigarettes that they intended to sell and distribute within the MOA. Thus, they avoided paying the MOA excise tax and increased their own profits.
The other co-conspirators paid a fee to Michael Butler and Sun Sims for the purchase of excise tax exempt cigarettes. They paid this fee for the tax exempt cigarette in an effort to avoid paying the tax owed to the MOA. Butler and Sims would collect payment from Kyong Hee Kim and other retailers. They would then convert the money collected into cashier’s checks that appeared to be purchased by either Golden Eagle Tobacco or Longmere Lake Grocery and Liquor. They then used these cashier’s checks to purchase more tax exempt cigarettes, which they then delivered to the following retail stores within the MOA:
- Up in Smoke, owned and operated by Michael Butler and Sun Sims and managed by Kimberly Sims
- Mini Stop, owned and operated by Kyong Hee Kim
- Party Time Liquor, owned and operated by Jae Gak Lee
- Cheap Smokes, owned and operated by Jae Ho Lee
- Lucky Seven Foodmart, owned and operated by Jerry Lee
The defendants received the following sentences:
- Michael Butler sentenced on 3/13/15 to 36 months incarceration, 3 years supervised release.
- Sun Sims sentenced on 2/4/15 to 34 months incarceration, 3 years supervised release, $18,000 fine.
- Jae Gak Lee sentenced on 2/2/15 to 16 months incarceration, 3 years supervised release, $100,000 fine.
- Jae Ho Lee, sentenced on 1/21/15 to 16 months incarceration, 3 years supervised release.
- Kimberly Crandell, sentenced on 1/21/15 to 3 years’ probation, $1,500 fine.
- Jerry Lee, sentenced on 1/20/15 to 9 months incarceration, 3 years supervised release.
- Kyong Hee Kim sentenced 12/4/14 to 5 years’ probation.
“Tax evasion unfairly shifts the burden to honest American taxpayers,” said Special Agent in Charge Teri Alexander. “IRS Criminal Investigation together with the Department of Justice will continue to work vigorously to protect our national and local tax systems.”
Municipal Treasurer Daniel Moore added, “On behalf of Anchorage taxpayers who stood as the collective victims in this case, the Municipality appreciates the successful efforts of DOJ, APD, and the IRS in obtaining felony convictions, appropriate jail terms, and restitution. The Municipality expects the results of this case will send a strong deterrent message to white collar criminals who seek to scheme and defraud the government in taxes owed and then expect all other local taxpayers to cover the shortage in revenue to fund city services.”
Assistant U.S. Attorney Stephan A. Collins of the U.S. Attorney’s Office, District of Alaska, prosecuted the case. The case was investigated by the Internal Revenue Service Criminal Investigation (IRS-CI), Alcohol Tobacco and Firearms (ATF), and the Anchorage Police Department.