Leader of Multi-Million-Dollar Tobacco Tax Fraud and Money Laundering Conspiracy Sentenced to Jail | USAO-WDWA

  Leader of Multi-Million-Dollar Tobacco Tax Fraud and Money Laundering Conspiracy Sentenced to Jail |  USAO-WDWA

According to records filed in the case, between 2009 and 2017, Kwon engaged in two schemes to defraud the state of tobacco excise taxes. The schemes involved two tribal smoke shops on the Puyallup reservation which sold significant quantities of tobacco products to TK Mac, the non-tribal tobacco distributor. Most of the sales were in cash, and TK Mac failed to report the purchases to the state, thus avoiding millions of dollars in excise taxes. When TK Mac then resold the products for cash, the company had a problem, since large deposits of cash would have triggered state scrutiny of its tobacco business. So, beginning in 2013 and continuing until 2017, Kwon and his coconspirators engaged in a money-laundering scheme: the two tribal smoke shops wrote checks to TK Mac as if the tribal smoke shops had purchased tobacco products from the non-tribal store. In fact, TK Mac simply provided the tribal smoke shops with large amounts of cash equal to the checks. No tobacco products changed hands, but TK Mac received an excise tax credit. As a result of these schemes, Washington State suffered losses of more than $10 million.

“For years, Mr. Kwon repeatedly laundered cash and created false invoices to avoid paying tobacco excise taxes. This didn’t just hurt the state coffers, it gave his business a competitive advantage over other small stores,” said U.S. Attorney Brown. “Now Mr. Kwon has a substantial restitution obligation, which will follow him even after he serves his prison term.”

Highlights

  • “Taxes, whether state or federal, are levied for the benefit of the public. When individuals like Mr. Silva, Mr. Kwon, Mr. Paul, and Mr. Kim scheme in a flagrant attempt to evade taxes, they are hurting the communities they purport to serve with their businesses,” said Bret Kressin, IRS Criminal Investigation (IRS:CI) Special Agent in Charge, Seattle Field Office. “Today’s sentence is a reminder that those who willfully dodge their duty to pay federal and state taxes will be held accountable for their actions. IRS:CI is committed to investigating those who choose their own greed over paying their fair share of taxes for the good of the public.”

  • The president of the company that owns the tribal smoke shops, Anthony Edwin Paul, was sentenced last month to 14 months in prison, a $5,000 fine, and $1,764,818 in restitution. Paul’s subordinate, Theodore Kai Silva, who operated the scheme on behalf of the tribal smoke shops, was sentenced today to four years of probation with six months of home confinement, plus $25,000 in restitution. Kwon’s coconspirator and business partner Tae Young Kim will be sentenced in February 2022.

The case was investigated by IRS-CI, with assistance from Homeland Security Investigations (HSI).

Following the indictment of various coconspirators, the government seized more than $5 million from Kwon and Kim. Today, Judge Robart imposed a $10,000 fine on Kwon and ordered him to pay $5,098,249 in restitution to the Washington State Department of Revenue, plus restitution to the IRS.

The case was prosecuted by Assistant United States Attorneys James Oesterle and Jonas Lerman.