Major Tobacco Distributor Sentenced to Five Years in Prison for $16 Million Excise Tax Fraud Scheme
For Immediate Release
U.S. Attorney's Office, Eastern District of California
SACRAMENTO, Calif. — Moo Hoon “Steve” Kim, 54, of Cypress, was sentenced today to five years in prison and ordered to pay over $16 million in restitution for mail fraud related to a scheme to avoid paying excise tax on tobacco products, Acting United States Attorney Phillip A. Talbert announced.
According to court documents, between 2006 and 2009, Kim was responsible for bringing over $35 million in untaxed other tobacco products (OTP) into California. OTP is any tobacco product other than cigarettes and consists primarily of cigars, chewing tobacco, and leaf tobacco. A federal jury found Kim guilty after a seven–day trial in March 2015 before United States District Judge William B. Shubb.
The evidence at trial showed that Kim used front companies, set up by others at his direction, to disguise his illegal purchases and subsequent sales of untaxed OTP from out-of-state sources. These companies included KS Wholesale in Vernon, California, and Cheap Cig Distributor in Paramount, California. Kim also used another front company – Discounted Tobacco in Long Beach, California – as a retail outlet for some of the untaxed OTP that he sold through his company, Jobber’s Wholesale. As a result of Kim’s scheme, California was defrauded of over $16 million in excise taxes. A large percentage of the revenue from the excise tax is used to fund California’s early childhood development program, First 5 California.
“Many resources were utilized to combat the unlawful trafficking of tobacco products by Moo Hoo Kim who was ultimately found guilty of mail fraud,” said Special Agent in Charge Jill A. Snyder. “ATF and our partners stopped the illegal activities by Kim which resulted in a loss of over $16 million dollars in excise taxes for state of California. Today’s sentencing reflects this significant prosecution.”
“This sentence is a huge victory in our fight against underground economic activity in our state,” said Board of Equalization Member Jerome E. Horton. “It reinforces the need for continued prosecution of these types of crimes.”
This case was the result of the efforts of a joint task force involving the U.S. Attorney’s Office, the California Department of Justice, the Bureau of Alcohol, Tobacco, Firearms, and Explosives (ATF), and the California State Board of Equalization (BOE). To date, 27 defendants have been sentenced in 16 criminal cases. Over $50 million in restitution has been ordered to be repaid to BOE. Nineteen civil forfeiture cases have resulted in over $16 million in assets seized for repayment to BOE for lost tax revenue. 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. Assistant United States Attorney Michael D. Anderson and U.S. Department of Justice Antitrust Division Trial Attorney Richard A. Powers, designated as a Special Assistant United States Attorney, prosecuted the case.
Updated May 27, 2016
Press Release Number: 2:13-cr-271 WBS