Glendale Man Sentenced in $3 Million Cigarette Smuggling Conspiracy

May 5, 2010 - LOS ANGELES — The United States Attorney for the Eastern District of North Carolina, George E.B. Holding, announced today that United States District Judge George H. King sentenced AVEDIS DJEREDJIAN, 41, of Glendale, California, to 87 months’ imprisonment followed by three years supervised release. The Court also ordered that DJEREDJIAN pay restitution in the amount of $3,236,617.50. Forfeiture in the same amount as restitution was also ordered.

On April 22, 2008, a federal jury sitting in Los Angeles found DJEREDJIAN guilty of all counts against him. Following post-trial motions, certain counts were dismissed, and DJEREDJIAN was sentenced for conspiring to traffic in contraband cigarettes, in violation of Title 18, United States Code, Sections 371 and 2342, and structuring financial transactions, in violation of Title 31, United States Code, Sections 5324(a)(3) and 5324(d).

This matter was originally indicted by a Federal Grand Jury sitting in the Eastern District of North Carolina in 2006, as much of the criminal activity took place in and around Raleigh, North Carolina. However, on May 16, 2007 at the request of defense counsel and over the objection of the United States, the Court in the Eastern District of North Carolina transferred the matter to the Central District of California.

The investigation and prosecution focused on the scheme led by DJEREDJIAN to purchase cigarettes out-of-state, primarily in North Carolina, and then smuggle them into California to sell, avoiding payment of California’s cigarette excise taxes. According to the evidence presented at the trial, from January, 2002, to June, 2005, DJEREDJIAN and others purchased more than 370,000 cartons of cigarettes from suppliers outside of California, using a series of fake and fraudulent “front” businesses. However, according to the evidence, DJEREDJIAN only purchased enough legitimate California tax stamps from the California Board of Equalization for 2,040 cartons. The tax stamps are required by California to be placed on each individual pack of cigarettes to show that the state excise tax had been paid. As a result, during the three-and-one-half year time period alleged in the indictment, DJEREDJIAN’S scheme deprived the State of California of more than $3.2 million in cigarette excise tax revenue.

Mr. Holding commented on the important nature of this case: “In a country comprised of 50 separate states, each with independent governing and taxing authorities, the Federal Government plays a unique and important role to ensure that individuals do not circumvent each states’ proper taxing authority. Here, the defendant developed a scheme to deprive California citizens of the enforcement of their laws and the proper collection of their taxes. We are please, on behalf of the Federal Government, to work to see those laws vindicated.”

“With the outcome of this case it should be very clear that there is no state line that will insulate illegal traffickers of cigarettes from our vigorous investigation and prosecution,” said ATF Special Agent in Charge Zebedee T. Graham. “ATF will continue to work with our law enforcement partners and prosecutors throughout the nation to identify, prosecute and seize the assets from those that believe crossing jurisdictions will protect their illegal trade.”

“The culmination of this investigation illustrates the strong working relationships that exist between law enforcement and judicial counterparts across the country,” said IRS-CI Supervisory Special Agent Jeannine A. Hammett. “As evidenced by this case, the Internal Revenue Service continues to focus our resources to protect our nation’s financial infrastructure.”

“Working collaboratively, we can stop criminal business tax evasion, level the playing field for legitimate California businesses, and recapture the billions lost to the black market. Today’s prosecution is but an example of what we can do when we work together,” commented Jerome E. Horton, Chairman, Fourth District, Board of Equalization.

The investigation of the case in the Eastern District of North Carolina was conducted by the Bureau of Alcohol, Tobacco, Firearms, and Explosives and the Internal Revenue Service. In the Central District of California, the investigative agencies included the Bureau of Alcohol, Tobacco, Firearms and Explosives and the California Board of Equalization. The United States Attorney’s Office for the Central District of California also lent assistance during trial. The case was handled by the Economic Crimes Section of the U.S. Attorney’s Office for the Eastern District of North Carolina. Assistant United States Attorney Clay C. Wheeler of the Eastern District of North Carolina handled this matter for the United States.