Economy

nitpicker

(7,153 posts) Sat Dec 24, 2016, 06:43 AM Dec 2016

Last Defendant in $48 Million Dollar Cigarette Tax Fraud Scheme Sentenced

https://www.justice.gov/opa/pr/last-defendant-48-million-dollar-cigarette-tax-fraud-scheme-sentenced

Department of Justice
Office of Public Affairs

FOR IMMEDIATE RELEASE
Friday, December 23, 2016

Last Defendant in $48 Million Dollar Cigarette Tax Fraud Scheme Sentenced

The case involved untaxed cigarettes sold in all 50 States and was the first prosecution in the nation under federal PACT Act

The last defendant in a domestic and international, multimillion-dollar cigarette tax fraud scheme has been sentenced, the Department of Justice announced today. On Thursday, U.S. District Judge David L. Bunning sentenced Anthony Cosica, 54, of Pinetop, Ariz., to 24 months in federal prison. Eight other defendants, including three from eastern Kentucky and two from Russia, have already been sentenced, for charges including conspiracy to commit mail fraud, wire fraud and money laundering and violations of the PACT Act. This case marks the first prosecution in the nation for violations of the PACT Act, which is a 2010 federal law enacted to prevent trafficking in untaxed cigarettes.

According to court documents and evidence presented at trial, from 2008 to 2013, the defendants devised a scheme that defrauded federal, state and local governments across the country, out of cigarette excise taxes totaling approximately $48 million. Specifically, the defendants operated mail order and internet businesses engaged in the delivery sales of untaxed cigarettes to customers in all 50 states.
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The leader of the conspiracy, John Maddux Jr., 56, formerly of Russell, Ky., operated mail order/online businesses that sold the cigarettes at discount prices. Maddux executed the scheme by forming a business with two Russian nationals, Alexander Sergeev and Mikhail Serov. Sergeev and Serov shipped cigarettes from Russia directly to customers of Maddux and his co-conspirators. Evidence at trial further established that Maddux also fulfilled cigarette orders for other co-conspirators, who were also operating similar mail/online businesses. To get the cigarettes through U.S. Mail, the defendants disguised and marked the cigarettes as gift items, which is a violation of the PACT Act.

Under the PACT Act, businesses are required to register and report cigarette and tobacco sales to state tax administrators, allowing States to properly collect required excise taxes from the businesses. The defendants intentionally avoided these requirements and millions of dollars in taxes during the scheme.
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