For Immediate Release
Wednesday, March 13, 2019
, United States Attorney
John H. Durham
Tobacco Wholesaler Sentenced to 18 Months in Prison for Defrauding Connecticut of $5.8 Million in Taxes
Boston Field Division
John H. Durham, United States Attorney for the District of Connecticut, announced that PAVAN VASWANI, 40, a citizen of India residing in West Haven, was sentenced today by U.S. District Judge Janet C. Hall in New Haven to 18 months of imprisonment, followed by two years of supervised release, for his role in a scheme to defraud the State of Connecticut of more than $5.8 million 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, Rishi 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 Vaswani. Vaswani, with Malik’s assistance, continued the tobacco wholesale business under the name KDV Discounts, LLC. 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.
Judge Hall ordered Vaswani and Malik to pay restitution of $5,821,057.
Malik and Vaswani were arrested on January 11, 2018. On August 21, 2018, Vaswani pleaded guilty to one count of conspiracy to commit wire fraud and to violate the Contraband Cigarette Trafficking Act (“CCTA”), and one count of wire fraud.
Malik, 46, a citizen of India residing in Fairfield, pleaded guilty to the same offenses on October 30, 2018. On February 13, 2019, he was sentenced to 36 months of imprisonment. Malik faces immigration proceedings when he completes his prison term.
Vaswani, who is released on a $250,000 bond, is required to report to prison on May 30, 2019.
This matter was being investigated by the Bureau of Alcohol, Tobacco, Firearms and Explosives and the Connecticut Department of Revenue Services, Criminal Investigations Division. The case was prosecuted by Assistant U.S. Attorneys Jennifer R. Laraia and Michael S. McGarry.