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Bureau of Alcohol, Tobacco, Firearms and Explosives

Southern California Tobacco Distributors Sentenced to Prison and $1.6 Million Restitution for Tax Evasion Scheme

Eastern District of California

 

www.justice.gov/usao/cae

For Immediate Release

December 19, 2013


Benjamin B. Wagner, United States Attorney

Contact: Lauren Horwood
(916) 554-2706
usacae.edcapress@usdoj.gov

Southern California Tobacco Distributors Sentenced to Prison and $1.6 Million Restitution for Tax Evasion Scheme

SACRAMENTO, Calif. — Thao “Nina” Nguyen, 36, and Luan Tran, 37, a married couple, both of San Bernardino, were sentenced today for their role in a scheme to defraud the state of California of approximately $1.6 million in state tobacco excise taxes, United States Attorney Benjamin B. Wagner and Alcohol, Tobacco, Firearms, and Explosives Special Agent in Charge Joseph M. Riehl announced.

United States District Judge Troy L. Nunley sentenced Nguyen to two and a half years in prison and sentenced Tran to six years and five months in prison. Judge Nunley also ordered the defendants to pay $1.6 million in restitution to the State of California Board of Equalization, and Nguyen was further ordered to pay $13,500 in restitution to Bank of America.

This prosecution by the U.S. Attorney’s Office was done in collaboration with the California Attorney General’s Office in an ongoing federal and state investigation into tobacco product wholesalers evading California excise taxes.

“Thanks to this successful prosecution, California will recover some of the $8.5 billion the BOE estimates the state loses annually to criminal tax evasion. This collaboration between our tax agency and law enforcement is paying dividends in recovering lost revenue, and holding these illegal operators in the underground economy accountable,” said BOE Chairman Jerome E. Horton.

Other Tobacco Products (OTP) consists of tobacco products other than cigarettes such as cigars, chewing tobacco, and leaf tobacco. During the relevant time period, California imposed an excise tax ranging from 33 to 45 percent, based on the wholesale purchase price of the product. California-licensed tobacco distributors are required to collect this tax when they distribute the product within the state. The distributor must then submit to the California State Board of Equalization (BOE) in Sacramento, monthly reports reflecting the amount of untaxed OTP sold in the previous month and the amount of excise tax owing, and the payment.

According to court documents, Nguyen and Tran used multiple business names and licenses to order over $4.4 million in OTP from out-of-state distributors over a two-year period. They then sold the product in California but did not report the bulk of their transactions, resulting in them defrauding the state of approximately $1.6 million.

Nguyen and Tran went to great lengths to conceal their OTP purchases from the state, frequently driving more than 1,000 miles one-way to pick up product, rather than having it delivered, in order to minimize the existence of any documents that could be used as evidence of their purchase of OTP. They used multiple fake business names and had product shipped to family members’ residences.

Nguyen was also sentenced for bank fraud, which arose out of her theft of three checks from an employer in Orange County. Nguyen made the checks payable to cash in a total amount of $13,500, and then used her son’s bank account to deposit the checks and withdraw the cash.

This case is the product of a series of investigations by a specialized task force comprising the U.S. Attorney’s Office, the California Attorney General’s office, the Bureau of Alcohol, Tobacco, Firearms and Explosives, and the California 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 $90 million in unstamped tobacco excise taxes to contraband distributors, and approximately $120 million in excise taxes for taxed 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. Attorneys 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.

 

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