Guilty Pleas Halt Federal Trial In Interstate Contraband Cigarette Trafficking Conspiracy Resulting In $1.1 Million Dollar Tax Revenue Loss To R.I.
PROVIDENCE, R.I. – The federal court jury trial of Wissam Khalil, 41, of Central Falls, R.I., and his brother Bassam Khalil, 49, formerly of Pawtucket, R.I., was halted Thursday when the two men pleaded guilty to their roles in a complex interstate contraband cigarette trafficking conspiracy that brought more than six million contraband cigarettes into Rhode Island from Virginia, and which cheated Rhode Island out of nearly $1.1 million dollars in tax stamp payments.
Additionally, Wissam Khalil pleaded guilty to conspiring to defraud the Supplemental Nutrition Assistance (Food Stamp) Program. Bassam Khalil admitted to defrauding the Social Security Administration.
Wissam Khalil pleaded guilty to one count each of transporting, possessing or selling in excess of 10,000 contraband cigarettes; structuring; and, conspiracy to defraud the Supplemental Nutrition Assistance Program. Bassam Khalil pleaded guilty to one count of transporting, possessing or selling in excess of 10,000 contraband cigarettes and one count of social security fraud. Both are detained in federal custody pending sentencing by U.S. District Court Chief Judge William E. Smith on September 25, 2014.
As a result of Thursday’s guilty pleas, seven of eight defendants charged in a sweeping fifteen-count superseding indictment returned in September 2013 have pleaded guilty and stand convicted of federal charges. A warrant has been issued for the eighth defendant who has remained outside of the United States since prior to the return of the grand jury indictment.
The guilty pleas are announced by Peter F. Neronha, United States Attorney for the District of Rhode Island; Colonel Steven G. O’Donnell, Superintendent of the Rhode Island State Police; Vincent B. Lisi, Special Agent in Charge of the Boston field office of the FBI; William P. Offord, Special Agent in Charge of the Boston field office of IRS Criminal Investigation; Bruce M. Foucart, Special Agent in Charge of Homeland Security Investigations for New England; Scott E. Antolik, Special Agent in Charge of the Boston field office of the Social Security Administration, Office of the Inspector General/Office of Investigations; and William G. Squires, Special Agent in Charge of the northeast region of the U.S. Department of Agriculture Office of Inspector General.
On May 8, 2013, more than a dozen teams of federal and Rhode Island state law enforcement agents and officers executed federal search warrants at ten locations where a significant quantity of contraband cigarettes, approximately $100,000 in cash, business records and four vehicles connected to the trafficking operation were seized. The majority of cash and cigarettes seized were discovered stashed in sophisticated hides in several of the locations. Seven individuals named in federal arrest warrants were located and arrested.
According to court documents and information presented to the court during various plea hearings and during the trial of Wissam and Bassam Khalil, as part of the conspiracy, in July 2011, several “shell” corporations were created and vacant retail storefronts were rented in Virginia for the purpose of making it appear that cigarettes being purchased in Virginia were for resale in Virginia. The cigarette packages included Virginia tax stamps, reflecting a Virginia tax of thirty-five cents per package.
According to court documents and information presented to the court, between July 2011 and May 2013, more than 30-thousand cartons (6 million) of cigarettes valued at more than $1.2 million dollars were purchased in Virginia and shipped to Rhode Island in a truck bearing Rhode Island War Veteran Plates, often times driven by a person wearing a United States Army uniform. The person, a member of the conspiracy, wore the uniform in an effort to gain favor and avoid law enforcement detection.
According to information presented to the court, the cigarettes were distributed and sold in Rhode Island at or near full-retail price, including a tax payment of $3.50 per package. The lack of payment of the cigarette tax to the state of Rhode Island resulted in a loss of nearly $1.1 million dollars in tax revenue.
Additionally, according to information presented to the court, charges of food stamp fraud and the unauthorized acquisition of food stamp funds were brought against Wissam Khalil and others, based on information developed during a separate joint federal and state investigation into more than $3 million dollars in food stamp fraud in Rhode Island. That investigation, first announced on September 5, 2013, by United States Attorney Peter F. Neronha, resulted in federal charges against thirteen individuals. To date, twelve of those defendants have pleaded guilty – nine have been sentenced. The thirteenth individual is being sought.
Wissam and Bassam Khalil and their co-defendants are being prosecuted by Assistant U.S. Attorneys William F. Ferland and Ly T. Chin.
The matter was investigated by the Rhode Island State Police, Federal Bureau of Investigation, Internal Revenue Service Criminal Investigations, United States Social Security Administration Office of Inspector General – Office of Investigations, Homeland Security Investigations and the U. S. Department of Agriculture Office of Inspector General.
United States Attorney Peter F. Neronha also acknowledges and thanks the Virginia State Police, the Virginia Department of Attorney General, the Virginia Division of Taxation, the Northern Virginia Cigarette Tax Board, the Rhode Island Division of Taxation – Excise Tax Compliance Unit, the Rhode Island Department of Attorney General, and the Cranston and Providence Police Departments for their assistance in this investigation.
To assist the media and the public, a glossary of federal judicial terms and procedures is available at http://www.justice.gov/usao/justice101/