For Immediate Release
Thursday, November 1, 2018
, United States Attorney
John H. Durham
Contact: Tom Carson
Tobacco Wholesaler Admits Role in Scheme to Defraud State of Connecticut of More Than $5.8 Million in Taxes
Boston Field Division
John H. Durham, United States Attorney for the District of Connecticut, announced that RISHI MALIK, 46, of Fairfield, pleaded guilty today in New Haven federal court to charges related to role in a conspiracy to defraud the State of Connecticut of millions of dollars in taxes due on tobacco products imported into the state.
According to court documents and statements made in court, the State of Connecticut imposes tax on tobacco products imported into Connecticut for distribution within Connecticut. Tobacco amounts purchased, and taxes due, are reported on Forms OP-300, which are filed with the Connecticut Department of Revenue Services.
For several years until 2012, Malik and a partner operated Connecticut Discounts LLC, a tobacco wholesale business based in Bridgeport. Through that company, Malik obtained tobacco products from out-of-state suppliers and distributed the products to a network of clients who offered tobacco products for retail sale. While operating Connecticut Discounts, Malik caused OP-300 forms to be filed with the Connecticut Department of Revenue Services, which underreported the amount of tobacco he imported into the state for distribution.
In June 2012, Malik sold Connecticut Discounts to Pavan Vaswani, who continued the tobacco wholesale business under the name KDV Discounts, LLC. From approximately June 2012 to April 2017, Malik frequently assisted Vaswani in importing tobacco products from out-of-state suppliers, including suppliers in Pennsylvania. Malik sometimes drove to Pennsylvania to pick up products that he delivered to KDV in Connecticut. He also participated in making orders, and sometimes delivered payments in cash.
Between January 2013 and April 2017, KDV acquired almost $12 million in tobacco products, primarily cigars and other products, from suppliers in Pennsylvania, and distributed these products to hundreds of customers in Connecticut that stocked tobacco products for retail sale. On the OP-300 forms that Vaswani filed with the Department of Revenue Services on behalf of KDV, the amounts reported were a small fraction of what KDV actually acquired. Through this scheme, Vaswani failed to report approximately $5,821,057 in tax to the State of Connecticut.
In 2014, Malik registered Discount Deals, LLC, with an address in Sciota, Pennsylvania. Malik held out Discount Deals to be a tobacco distribution business. However, the unit he rented was not a space for a legitimate tobacco business and was maintained to create the appearance that Discount Deals was a legitimate Pennsylvania-based tobacco wholesaler. Between 2014 and at least April 2017, to subvert other federal regulations regarding interstate transport of smokeless tobacco, Malik used Discount Deals to purchase more than $1.1 million in smokeless tobacco products from Pennsylvania suppliers. A substantial amount of these smokeless tobacco products were provided to KDV for distribution in Connecticut. Discount Deals made no tax payments to the State of Connecticut between 2014 and 2017, and approximately $400,000 in smokeless tobacco tax was not reported to Connecticut or other states.
Malik and Vaswani were arrested on January 11, 2018.
Malik pleaded guilty to one count of conspiracy to commit wire fraud and to violate the Contraband Cigarette Trafficking Act (“CCTA”), an offense that carries a maximum term of imprisonment of five years, and one count of wire fraud, an offense that carries a maximum term of imprisonment of 20 years. He is scheduled to be sentenced by U.S. District Judge Janet C. Hall on January 23, 2018.
On August 21, 2018, Vaswani, 40, of West Haven, pleaded guilty to the same offenses. He awaits sentencing.
Both Malik and Vaswani have agreed to a restitution order of $5,821,057.
Malik and Vaswani are released on bonds pending sentencing.
This matter is being investigated by the Bureau of Alcohol, Tobacco, Firearms and Explosives and the Connecticut Department of Revenue Services, Criminal Investigations Division. The case is being prosecuted by Assistant U.S. Attorneys Jennifer R. Laraia and Michael S. McGarry.