On January 11th, 2023

Three Arrested in $7 Million Tobacco Excise Tax Fraud Scheme

“Tax evasion hurts our communities as taxes not being paid is money not going to programs that help our California families.  Thankfully the State has investigators who target California’s underground economy.”  - CSLEA President Alan Barcelona

OAKLAND — On January 11, 2023, the California Attorney General announced the arrest of three owners of a tobacco distribution company for conspiring to carry out a large-scale excise tax fraud scheme.

An investigation found that the defendants allegedly filed fraudulent tax returns to evade more than $7 million in taxes. The three defendants face multiple felony charges, including conspiracy to file false tax returns and money laundering.

The investigation was carried out by the TRUE task force, which includes members of the California Department of Justice (DOJ), the California Franchise Tax Board, the Employment Development Department, and the California Department of Tax and Fee Administration (CDTFA).

“By failing to pay tobacco excise taxes, these defendants deprived communities in California of much-needed healthcare funding,” said Attorney General Rob Bonta. “I am grateful for our team at the California Department of Justice, and our TRUE task force partners for their hard work on this investigation.”

Between August 2020 and March 2021, the three suspects allegedly purchased more than $12.7 million in tobacco products from different companies in Pennsylvania and imported them into California. They then allegedly conspired together to file false tax returns that did not disclose these transactions, in order to avoid paying the $7.27 million in taxes they had incurred. The three individuals face multiple felony charges, including conspiracy to file false tax returns and money laundering.

In the press release announcing the arrests, the suspects were not identified by name.

The TRUE task force investigates and prosecutes economic crimes in the underground economy. That includes combating fraud, wage theft, tax evasion, piracy, the sale of black-market drugs, among other crimes. The task force consists of attorneys, investigators, and special agents from the member agencies.

 

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