Tobacco Distributors Plead Guilty to Multi-Million Dollar Tax Evasion Scheme
BOSTON – Two men pleaded guilty today in U.S. District Court in Boston to evading federal income taxes and defrauding the Commonwealth of Massachusetts of millions of dollars in connection with the sale of cigarettes and other tobacco products.
Raza Ali, 56, of Hopkinton, and Kaleem Ahmad, 47, of Sharon, both pleaded guilty to one count of conspiring to commit wire fraud and launder money and one count of making a false statement on a federal income tax return. Ali and Ahmad were arrested and charged in a criminal complaint in December 2015. A third co-conspirator, Muhammad Saleem Iqbal, 54, of Sharon, also pleaded guilty for his role in the same conspiracy in May 2016. Ali is scheduled to be sentenced on Sept.14; Ahmad on Sept. 9; and Iqbal on Sept. 7, 2016.
Ali, Iqbal and Ahmad operated a wholesale business in Norwood, Mass. that sold tobacco products, including cigars, smoking tobacco and smokeless tobacco (such as snuff and chewing tobacco), to convenience stores, gas stations and other retail businesses. The business was conducted in Massachusetts under the names “Pick N Dip” and, later, “MSI Distributors.”
Wholesale businesses that distribute smoking tobacco, smokeless tobacco and cigars in the Commonwealth of Massachusetts must be licensed by the Massachusetts Department of Revenue. Wholesalers of smokeless tobacco must file an excise tax form monthly and pay excise tax on smokeless tobacco brought into and sold in Massachusetts. Cigar and smoking tobacco wholesalers must file an excise tax form quarterly and pay excise tax on cigars and smoking tobacco brought into and sold in Massachusetts.
To supply their business, Ali and Iqbal repeatedly purchased tens, and sometimes hundreds of thousands, of dollars at a time of smoking tobacco, smokeless tobacco and cigars in Pennsylvania, where no taxes are imposed on these products. Ali then arranged to have the products covertly transported to Massachusetts for resale. Ali and Iqbal did not file reports and records required by state and federal law, and did not pay excise taxes.
Ali, Iqbal and Ahmad accepted payments primarily in cash. They made and directed multiple bank deposits of cash from the business in amounts less than $10,000 to create the false appearance that the total amount being deposited fell below the amount they knew the banks were required to report to the U.S. Treasury Department. Ahmad and others repeatedly transported cash in excess of $50,000 at a time generated by the sale of untaxed cigars, smoking tobacco and smokeless tobacco products in Massachusetts to Pennsylvania, where the money was used to purchase additional untaxed tobacco products.
The charge of conspiracy provides for a sentence of no greater than five years in prison, three years of supervised release, restitution to the Commonwealth, and a fine of twice the tax loss to the Commonwealth. The charge of subscribing to a false income tax return provides for a sentence of no greater than three years in prison, one year of supervised release, restitution to the federal government and a fine of $100,000. Actual sentences for federal crimes are typically less than maximum penalties. Sentences are imposed by a federal district court judge based on the U.S. Sentencing Guidelines and other statutory factors.
United States Attorney Carmen M. Ortiz; Joel P. Garland, Special Agent in Charge of the Internal Revenue Service’s Criminal Investigation in Boston; Harold H. Shaw, Special Agent in Charge of the Federal Bureau of Investigation, Boston Field Division; and David W. Hall, Special Agent in Charge of the Department of State, Diplomatic Security Service, Boston Field Office, made the announcement today. The Norwood Police Department provided valuable assistance in the investigation. The case is being prosecuted by Assistant U.S. Attorney Stephen P. Heymann of Ortiz’s Economic Crimes Unit.