Final Defendant Sentenced In “Operation Cowtown Tobacco”
ATF, Texas Comptroller of Public Accounts and Euless Police Department
Led Investigation into Trafficking of Contraband Cigarettes
DALLAS — A multi-year investigation into the trafficking of untaxed cigarettes, including purchasing cigarettes and selling them with counterfeit tax stamps to avoid paying state cigarette taxes, in violation of the Contraband Cigarette Trafficking Act, has led to the conviction of 11 Texas residents, most of whom are from North Texas.
The last convicted defendant was sentenced this week in federal court in Dallas. Glen Murray McDonald, 50, of Pasadena, Texas, was sentenced by U.S. District Judge David C. Godbey to serve nine months in federal prison and nine months on home confinement. He pleaded guilty in August 2013 to one count of trafficking in contraband cigarettes and one count of receipt of counterfeit securities. Ten other convicted defendants pleaded guilty to similar offenses and received a variety of sentences. In addition, convicted defendants were ordered to pay restitution in amounts ranging from approximately $24,000 to $1.1 million.
The investigation began in October 2009 when officers from the Euless Police Department responded to a suspicious person call at a home in Euless, Texas. Later that same night, they executed a search warrant at the house and confiscated more than 2,760 cartons of contraband cigarettes and 11,580 counterfeit Texas tax stamps.
In making the announcement today, U.S. Attorney Saldaña said, “I commend the efforts of the men and women of the Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF), the Texas Comptroller of Public Accounts, the Euless Police Department and the Tarrant County District Attorney’s Office in this operation.”
During the investigation, special agents with ATF received information about various tobacco tax diversion schemes in North Texas, including purchasing cigarettes and selling them with counterfeit tax stamps to avoid paying state cigarette taxes.
“ATF’s mission is to stop violent criminals and dismantle criminal organizations. Through this joint investigative effort, multiple criminal organizations were dismantled which were responsible for the diversion of state revenue caused by the trafficking of contraband tobacco products. I’d like to recognize the Euless Police Department, the Texas Comptroller of Public Accounts and the Tarrant County District Attorney’s Office whose outstanding efforts contributed to the successful outcome of this investigation,” said ATF Special Agent in Charge Robert R. Champion of the Dallas Field Division.
“This is an example of how federal investigators utilize the expertise of the Comptroller’s office to bring tax cheats to justice,” Texas Comptroller Susan Combs said. “We have the expertise and statutory authority to conduct tax investigations as well as share information such as business purchases and tax reports with law enforcement. We will continue to provide our services to federal and local investigators to ensure compliance and protect honest retailers.”
Cigarettes sold in Texas are required to have a federal tax assessed; that tax is paid by the manufacturer before cigarettes leave the warehouse. Texas also requires that a state tax be paid in the form of a tax stamp affixed to each package of cigarettes sold. Only companies licensed by the Texas Comptroller’s Office are allowed to purchase tax stamps and bond them to cigarette packages. The current cigarette tobacco tax stamp is $1.41 per package of cigarettes. By purchasing contraband cigarettes, people involved in the sale of untaxed cigarettes avoid paying Texas taxes in the amount of $1.41 per package, or $14.10 carton, or $846 for a master case of 60 cartons.
Assistant U.S. Attorney Katherine E. Pfeifle prosecuted the cases.