New York Business Must Pay $1 Million Fine, Restitution, Money Judgement for Contraband Cigarette Trafficking

Oklahoma Man Also Pleads Guilty to Contraband Cigarette Trafficking

KANSAS CITY, Mo. – Tammy Dickinson, United States Attorney for the Western District of Missouri, announced that a New York business was sentenced in federal court today for its role in a conspiracy to transport hundreds of thousands of cartons of contraband cigarettes from the Kansas City, Mo., area to the state of New York, where they were sold primarily on Indian reservations.

In a separate case that arose from the same undercover investigation, a Blanchard, Okla., man pleaded guilty in federal court earlier this week to his role in a conspiracy to traffic in contraband cigarettes.

A.J.’s Wholesale, LLC, of Irving, N.Y., was sentenced by U.S. District Judge Brian C. Wimes. The court ordered AJ’s to pay a $1 million fine. The company also must forfeit to the government $221,550, which represents the proceeds of the offense. The court also ordered the company to pay an additional $535,050 in restitution to the state of New York. Under the terms of the company’s plea agreement, AJ’s is prohibited from selling premium cigarettes for two years.

On Feb. 6, 2014, AJ’s pleaded guilty to participating in a conspiracy to commit wire fraud and traffic in contraband cigarettes from June 2010 to Jan. 26, 2012.

USA v. Bell

In a separate case that arose from the same undercover investigation, a Blanchard, Okla., man pleaded guilty in federal court on Tuesday, July 29, 2014, to possessing and transporting contraband cigarettes. Under the terms of his plea agreement, Bell must forfeit to the government a total of $157,940 that was seized by law enforcement officers.

Robert Dean Bell, 45, of Blanchard, admitted that he traveled from Oklahoma to Kansas City, Mo., on several occasions between August 2011 and January 2012 to purchase untaxed cigarettes. He transported approximately 17,400 cartons of untaxed Marlboro and Newport cigarettes back to Oklahoma. As a result of these transactions, the amount of total excise tax loss to the state of Oklahoma is approximately $275,163.

Under federal statutes, Bell is subject to a sentence of up to five years in federal prison without parole, plus a fine up to $250,000. A sentencing hearing will be scheduled after the completion of a presentence investigation by the United States Probation Office.

USA v. A.J.’s Wholesale, LLC

AJ’s, a tobacco wholesaler located on a reservation, is not licensed to bring untaxed cigarettes into the state of New York. The company admitted that AJ’s ordered contraband cigarettes from co-conspirators and caused those cigarettes to be transported into New York, knowing that the state excise tax of $4.35 per pack would not be paid as required by state and federal law.

As a result of AJ’s role in this conspiracy, the amount of total excise tax loss to the state of New York was approximately $535,050.

According to the indictment, conspirators purchased more than $17 million worth of contraband cigarettes from ATF agents during an undercover operation. Approximately 620,600 cartons of cigarettes – containing 10 packs per carton – were transported to New York without paying the required $4.35 per pack excise tax. The untaxed cigarettes were sold by New York retailers and smoke shops on the reservations in the state of New York. The total state excise tax lost to the state of New York was more than $8 million.

In addition to the federal indictment, the undercover operation resulted in a $3.5 million civil forfeiture. Following the seizures that occurred as a result of the investigation, the U.S. Attorney’s Office started a $3.5 million civil forfeiture case naming the assets taken up to that point. On Oct. 23, 2012, the court entered a default order of forfeiture for more than $2 million seized from bank accounts and by agents, more than 300 cases of seized cigarettes, a 2009 Cessna T206H Stationair aircraft, two 2012 Peterbilt 389 trucks and two 2012 Peterbilt 386 trucks. The seized cigarettes have been sold at auction for $532,500. The 2009 Cessna Aircraft has been sold for $450,000. The four trucks have been sold for the following amounts: $115,000; $115,000; $113,000; and $113,000. The civil case has been stayed pending the resolution of the criminal case.

This case is being prosecuted by Assistant U.S. Attorneys Paul S. Becker and Justin G. Davids. It was investigated by the Bureau of Alcohol, Tobacco, Firearms and Explosives, IRS – Criminal Investigation, the Federal Deposit Insurance Corporation – Office of Inspector General and the Kansas City, Mo., Police Department.