KANSAS CITY, Mo. – Tammy Dickinson, United States Attorney for the Western District of Missouri, announced that a New York business must pay up to $1 million in fines, forfeiture and restitution after pleading guilty in federal court today to its role in a conspiracy to transport hundreds of thousands of cartons of contraband cigarettes from the Kansas City, Mo., area to the state of New York, where they were sold primarily on Indian reservations.
AJ’s Candy & Tobacco, LLC, of Irving, N.Y., pleaded guilty before U.S. District Judge Brian C. Wimes to participating in a conspiracy to commit wire fraud and traffic in contraband cigarettes from June 2010 to Jan. 26, 2012.
Under the terms of today’s plea agreement, the company must forfeit to the government $221,550 (which represents the proceeds of the offense) and pay a fine of $243,400. The court may also order the company to pay an additional $535,050 in restitution to the state of New York. The government and the defendant are in agreement that a sentence of two years of probation is appropriate. Also, as part of the agreement, AJ’s is prohibited from selling premium cigarettes for two years.
AJ’s, a tobacco wholesaler located on a reservation, is not licensed to bring untaxed cigarettes into the state of New York. By pleading guilty today, the company admitted that AJ’s ordered contraband cigarettes from co-conspirators and caused those cigarettes to be transported into New York, knowing that the state excise tax of $4.35 per pack would not be paid as required by state and federal law.
As a result of AJ’s role in this conspiracy, the amount of total excise tax loss to the state of New York was approximately $535,050.
According to the indictment, conspirators purchased more than $17 million worth of contraband cigarettes from ATF agents during an undercover operation. Approximately 620,600 cartons of cigarettes – containing 10 packs per carton – were transported to New York without paying the required $4.35 per pack excise tax. The untaxed cigarettes were sold by New York retailers and smoke shops on the reservations in the state of New York. The total state excise tax lost to the state of New York was more than $8 million.
In addition to the federal indictment, the undercover operation resulted in a $3.5 million civil forfeiture. Following the seizures that occurred as a result of the investigation, the U.S. Attorney’s Office started a $3.5 million civil forfeiture case naming the assets taken up to that point. On Oct. 23, 2012, the court entered a default order of forfeiture for more than $2 million seized from bank accounts and by agents, more than 300 cases of seized cigarettes, a 2009 Cessna T206H Stationair aircraft, two 2012 Peterbilt 389 trucks and two 2012 Peterbilt 386 trucks. The seized cigarettes have been sold at auction for $532,500. The 2009 Cessna Aircraft has been sold for $450,000. The four trucks have been sold for the following amounts: $115,000; $115,000; $113,000; and $113,000. The civil case has been stayed pending the resolution of the criminal case.
The operation also resulted in a non-prosecution agreement that requires HCI Distribution, a Winnebago, Neb., company, to pay a $300,000 penalty. HCI Distribution is a subsidiary of Ho-Chunk, Inc., a corporation operated by the Winnebago Tribe of Nebraska, a federally recognized Indian tribe.This case is being prosecuted by Assistant U.S. Attorneys Paul S. Becker and Justin G. Davids. It was investigated by the Bureau of Alcohol, Tobacco, Firearms and Explosives, IRS – Criminal Investigation, the Federal Deposit Insurance Corporation – Office of Inspector General and the Kansas City, Mo., Police Department.