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Press Release

Port Orchard Man Sentenced to Four Years in Prison for Wire Fraud and Tax Evasion Scheme that Cheated State Out of Millions in Tobacco Taxes

For Immediate Release
U.S. Attorney's Office, Western District of Washington
Purchased and Sold Tobacco Products with Cash and Failed to Pay State and Federal Taxes

          The owner and manager of a tobacco wholesaling company, CP Trading Company, was sentenced today in U.S. District Court in Tacoma to 48 months in prison for wire fraud and tax evasion, announced U.S. Attorney Annette L. Hayes.  HYUN SEUNG KIM, 45, was ordered to pay nearly $2.5 million in restitution to the state of Washington for tobacco taxes owed and $294,922 to the U.S. Treasury for taxes he failed to pay on unreported income between 2009 and 2013.  At sentencing U.S. District Judge Ronald B. Leighton told him “you knew it was wrong because you went to such extremes to manipulate the system, always deflecting attention from yourself to others.”

            “When this defendant sold untaxed tobacco products, he acted as though the rules did not apply to him,” said U.S. Attorney Annette L. Hayes.  “In the process he undercut those who sold properly taxed tobacco products—many of whom are small business owners.  He also failed to pay his fair share into state coffers – funds used to support education, health care and other important programs.  I commend the criminal investigators for their work on this case.”

            According to records filed in the case, between 2009 and 2015, KIM’s company purchased and distributed wholesale non-cigarette tobacco products to retailers in Pierce, Mason, Kitsap and Thurston Counties.  Using cash, KIM would purchase substantial amounts of tobacco products from a smoke shop on the Puyallup Indian Reservation.  KIM would purchase a small portion of the product using checks.  KIM reported the purchases made by check to the state Department of Revenue and paid the tax on those purchases. He did not report the cash purchases.  KIM’s company sold the products to various retail outlets – again failing to report the cash sales.  KIM had various relatives open bank accounts so that he could deposit the cash in their names to hide it from regulators.  By dealing in cash KIM avoided paying state taxes on the tobacco products and also avoided paying federal income taxes.  For example, in 2013 KIM claimed his taxable income was $8,000 so that he owed tax of just $593.  In fact KIM earned more than $200,000 from CP Trading Company and owed more than $50,000 in federal income tax.

                “Tax evasion is nothing short of stealing; stealing from the US Treasury, but more significantly, stealing from all the honest taxpayers who are paying their fair share,” said Special Agent in Charge Teri Alexander of IRS Criminal Investigation. “The central mission of the IRS is to protect the integrity of our nation’s tax code, and we will diligently pursue those who shirk their civic duty by violating federal and state tax laws.”

            The case was investigated by the Internal Revenue Service Criminal Investigation, the Washington State Department of Revenue and the Washington State Liquor and Cannabis Board.  The case was prosecuted by Assistant United States Attorney Matthew Diggs.

Updated February 4, 2016

Topics
Financial Fraud
Tax