Los Angeles Tobacco Distributors Plead Guilty in a Scheme to Avoid Almost $2.5 Million in Excise Tax
SACRAMENTO, Calif. — United States Attorney Benjamin B. Wagner and California Attorney General Kamala D. Harris, announced that Adib Sirope, 59, and Rimoun Mansour, 51, both of Burbank, each pleaded guilty today in U.S. District Court in Sacramento to one count of mail fraud for their role in a scheme to defraud the State of California of almost $2.5 million in state tobacco excise taxes.
According to the plea agreements, from 2004 to 2008, Sirope and Mansour, owners of Pay–Less Wholesale in North Hollywood, mailed intentionally fraudulent tobacco excise tax returns to the California Board of Equalization (BOE) that dramatically under–reported the amount of tobacco they sold in the state. Consequently, they avoided paying the majority of the excise taxes owed. California tobacco distributors of unstamped tobacco (like cigars and chewing tobacco) must report the in–state sales monthly to the BOE and pay approximately 46 percent of the wholesale price in excise taxes.
According to court documents, Sirope and Mansour carried out the scheme to defraud the state by ordering and receiving untaxed tobacco products from a Las Vegas tobacco distributor that would use phony company names on the invoices and shipping records. This was done to avoid a paper trail that law enforcement might use to unravel the scheme. The product was then shipped to a trucking terminal in Los Angeles instead of the defendants’ actual place of business. Tobacco ordered and received in this way was never reported to the BOE, and the defendants did not pay the excise taxes to the state. To give their company a veneer of legitimacy, however, the defendants periodically purchased a smaller amount of tobacco from the Las Vegas distributor in a legitimate manner, i.e., the product was sent directly to their place of business and the invoices and shipping documents had the true company name on them. The defendants reported and paid taxes on these smaller, legitimate transactions.
This case is the product of a continuing cooperative effort between U.S. Attorney’s Office for the Eastern District of California, the California Attorney General’s Office, the Bureau of Alcohol, Tobacco, Firearms and Explosives, and the California Board of Equalization. Assistant U.S. Attorney R. Steven Lapham and California Deputy Attorney General Peter Williams, cross–designated as a Special Assistant U.S. Attorney, are prosecuting the case.
Together with the California Attorney General’s Office, we are making progress in rooting out excise tax evasion in the tobacco products industry, and securing restitution for the State of California,
said U.S. Attorney Wagner. Our joint efforts are continuing.
These criminals stole money from the state of California and, in the process, hurt all Californians,
said Attorney General Kamala D. Harris. I commend the work of this task force and our partner agencies in bringing them to justice.
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.
Sirope and Mansour are scheduled to be sentenced by United States District Judge John A. Mendez on May 22, 2012. They face a maximum statutory penalty mail fraud of 20 years in prison. The actual sentence, however, will be determined at the discretion of the court after consideration of any applicable statuary factors and the Federal Sentencing Guidelines, which take into account a number of variables.
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