U.S. Department of Justice
United States Attorney
Eastern District of California
Eastern District of California
For Immediate Release
December 15, 2010
Benjamin B. Wagner, United States Attorney
Contact: Lauren Horwood
Southern California Man Convicted of Tobacco Excise Tax Fraud
SACRAMENTO, California — United States Attorney Benjamin B. Wagner announced today that a federal jury in Los Angeles convicted Abdurrahman Yousuf, 46, of Calabasas, California, of 23 counts of interstate commerce fraud and trafficking in contraband tobacco.
This case is the product of an extensive investigation by the Bureau of Alcohol, Tobacco, Firearms and Explosives and the California Board of Equalization.
Based on the trial testimony, the loss to the State of California as a result of the scheme to evade excise taxes could be as high as $10 million. Yousuf was a licensed wholesaler of tobacco products other than cigarettes, known as OTP (other tobacco products) such as cigars, chewing tobacco, and leaf tobacco. The evidence at trial showed that he purchased untaxed OTP from out-of-state distributors as far away as Chicago, who shipped the product into the state using obscure interstate carriers and without reporting the shipments to the State. As a wholesaler, Yousuf was not legally entitled to possess untaxed OTP under state law. He received and stored the product at public storage units away from his business premises, which is also a violation of state law. To further disguise these shipments and avoid creating a paper trail, Yousuf would pay for the product in cash or money orders. The evidence at trial showed that these cash payments frequently exceeded $200,000. He then sold the untaxed OTP for cash and without providing proper receipts identifying the buyer and seller, a further violation of state law.
This case is the first of approximately a dozen to go to trial that charge schemes to defraud the State of tobacco excise tax. Twenty-one other persons and five businesses have been charged in the cases filed in U.S. District Courts in Sacramento and Los Angeles. Loss to the state of California in unpaid tobacco excise taxes from the conduct charged in the cases filed to date is estimated at more than $35 million (not including penalties and interest). Approximately $1.3 million in tobacco products and other assets have already been ordered forfeited, and civil forfeiture proceedings are pending against another $21.5 million in seized products and other assets.
This investigation has exposed systematic and widespread tax evasion in the distribution of tobacco products in California, said U.S. Attorney Wagner.
Participants in that industry who might be tempted to short-change the State of California should take note of the conviction announced today, and should understand that our investigation is ongoing, our prosecutions have just begun, and crime does not pay.
Today was a great example of how ATF is working hard every day to disrupt and eliminate criminal organizations by identifying, investigating, and arresting offenders who illegally traffic in tobacco products, stated Special Agent in Charge Stephen C. Herkins.
We will continue to aggressively pursue those who violate the law and defraud the state of California, along with our law enforcement partners who are a vital part of the ATF Task Force.
The cases are being prosecuted by a specialized task force that includes the U.S. Attorney’s Office, the California Attorney General’s office, ATF, and the California Board of Equalization. Assistant U.S. Attorney R. Steven Lapham and California Deputy Attorney General Peter Williams, cross-designated as a Special Assistant U.S. Attorney for purposes of these cases, are prosecuting the cases. The U.S. Attorney’s Office for the Central District of California provided assistance.
The maximum penalty for each count of mail fraud is 20 years in prison, a $250,000 fine, and a three-year term of supervised release. The maximum penalty for each count of trafficking in contraband tobacco and each count of conspiracy is five years in prison, a $250,000 fine, and a three-year term of supervised release. The actual sentence, however, will be determined at the discretion of the court after consideration of any applicable statutory sentencing factors and the Federal Sentencing Guidelines, which take into account a number of variables.
The charges are only allegations and the defendants are presumed innocent until and unless proven guilty beyond a reasonable doubt.