U.S. Department of Justice
United States Attorney
Eastern District of California
Eastern District of California
For Immediate Release
April 4, 2013
Benjamin B. Wagner, United States Attorney
Contact: Lauren Horwood
San Diego Tobacco Distributor Sentenced to Prison for Excise Tax Fraud
SACRAMENTO, Calif. — Salam Kalasho, 43 of El Cajon, was sentenced yesterday by United States District Judge Kimberly J. Mueller to four years in prison for his role in a scheme to defraud the State of California of more than $8.5 million in state tobacco excise taxes, United States Attorney Benjamin B. Wagner announced. Judge Mueller also ordered Kalasho to pay $8.5 million in restitution to the State of California.
The work of the task force 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 sentence announced today, and be warned that our investigations are not over.
This sentence is a result of the diligent work of ATF and other members of our task force and prosecution team, stated Joseph M. Riehl, Special Agent in Charge of the Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF), San Francisco Field Division.
Investigations into tobacco traffickers are arduous and require a long–term commitment, but the investment of our resources has prevented the loss of millions of dollars for the state of California.
According to court documents, Kalasho was the president of Pisces International Inc., a licensed tobacco distributorship in El Cajon. In order to avoid paying excise taxes, he used multiple businesses in Arizona and California, multiple bank accounts in California under different account names, and multiple sets of financial records. Kalasho reported 95–100 percent of his non cigarette sales or
other tobacco products (OTP) as being exported out–of–state, thus relieving him of his excise tax liability to California. In reality, the majority of his OTP was sold in the state of California, most within driving distance of his business.
As a licensed tobacco products distributor in California, Kalasho was required to report his monthly OTP distributions and pay the excise tax to the State of California. As part of the scheme, Kalasho would periodically submit by mail to the California State Board of Equalization (BOE), distributor returns that were false and fraudulent, under reporting the actual distributions and excise tax due to the State of California. As part of the conspiracy, Kalasho would sell the untaxed OTP primarily to California customers, including co–defendant Anil Malhi who owned LA Price King, one of Pisces’ biggest customers. Both companies are now out of business. The majority of the sales were at an untaxed price, and these sales would be made
off invoice, but on occasion sales would be made at a fully taxed price so as to generate legitimate invoicing that could serve as
proof that the product in inventory had been taxed. Malhi received the largest portion of this
off invoice OTP but concealed his purchases from the BOE and destroyed records that disclosed the true amount of his purchases from Kalasho.
The California excise tax for OTP was more than 46 percent of the wholesale cost during the time of the scheme. Due to this high rate, a large profit margin exists for individuals or companies who can illegally evade paying it.
Kalasho and Malhi pleaded guilty to conspiracy to commit mail fraud on July 7, 2011. Malhi is scheduled to be sentenced on June 12, 2013. He faces a maximum statutory penalty of 20 years in prison plus restitution. The actual sentence, however, will be determined at the discretion of the court after consideration of the Federal Sentencing Guidelines, which take into account a number of variables.
This case is the product of an investigation by a specialized task force comprising the U.S. Attorney’s Office, the Bureau of Alcohol, Tobacco, Firearms and Explosives, the California Attorney General’s office, and the Board of Equalization. For the last several years, these offices have supported a task force dedicated to combating the systemic problem of tobacco excise tax evasion in California. In 2007, the BOE estimated that the state lost approximately $94 million in tobacco excise taxes on OTP to contraband distributors, and approximately $182 million in excise taxes for stamped tobacco like cigarettes. Because California has a relatively high tobacco excise tax rate, it is a frequent target for contraband tobacco smugglers and tax evaders. Assistant U.S. Attorney R. Steven Lapham is prosecuting the case.