Tax: MN Response for cigarette tax bill

13 charged with fraud over tobacco sales taxes

February 22, 2007
Rochelle Olson and Pam Louwagie

Thirteen people face federal charges of defrauding the state of more than $2.5 million in sales tax by concealing revenues from cigarette sales, according to a federal indictment unsealed Thursday.

The indictment, which according to attorneys in the case was unsealed by a U.S. District Court magistrate judge, cites numerous attempts to conceal earnings and wealth through fraudulent bookkeeping and tax returns, as well as property transfers and large cash transactions.

One defendant is accused of stashing $1 million cash in his ceiling, and another allegedly bought a BMW car with $20 and $50 bills.

Scott Tilsen, a federal public defender, said it is too early to know the full extent of what the government claims or what it can prove.

“They’ve charged a form of tax evasion over a four-year period involving a large number of individuals named and unnamed,” Tilsen said. “Traditionally, there’s always a few tax prosecutions brought … as we approach April 15.”

The case, the result of a joint investigation by the FBI and the Internal Revenue Service, includes one conspiracy count, 13 mail fraud counts and 26 wire fraud counts.

In addition to conspiracy charges, 11 of the defendants are accused of mail and wire fraud involving false or incomplete sales tax payments or filings.

All but one of the 13 defendants uses or has used the last name Wazwaz.

The defendants own 52 Twin Cities-area tobacco stores, including Wholey Smokes in Blaine, Coon Rapids and Minnetonka, and Mr. Discount Tobacco I in Fridley and II in Roseville.

Transactions date to 1996

The 58-page indictment alleges that the dozens of transactions date from 1996 through the present and details numerous transactions involving thousands of dollars.

The defendants also are accused of transferring nearly $1 million to Jordan, Lebanon and the Palestinian territories through checks, currency and wire transfers backed by the tobacco store proceeds.

An unindicted co-conspirator was caught at the Minneapolis-St. Paul International Airport in March 2003 with six cashier’s checks worth $108,030 destined for Lebanon, the indictment said.

“There’s millions of Americans who send funds to relatives overseas,” Tilsen said, noting that the money can add up over time. He represents Yousef Mahmoud Wazwaz, also known as Joseph Mahmoud.

The indictment alleges that the defendants, in order to conceal their worth, transferred the ownership of the tobacco stores rapidly back and forth to “conceal from the United States the true owner of and who benefited from the stores.”

Despite substantial cash receipts in the stores, the defendants did not deposit a significant portion in their bank accounts but rather “used the cash to pay employees, to acquire inventory, to pay personal expenses or to hoard.”

In 2000, the indictment claims, Tawfiq Othman Wazwaz stored $1 million in cash in the “suspended ceiling in the basement of his residence.”

Another defendant, Raed Yassin Wazwaz, is alleged to have paid $32,825 in cash for a BMW in 2001, using $20 and $50 bills.

In April 2004, an unindicted coconspirator identified as B.W. “transported $17,500 in currency generated by stores under his control.” The owner of Stillwater Tobacco also wrote a check to B.W. for $35,000 in May 2002, claiming it was a “gift,” the indictment said.

Some defendants owned homes and cars in the names of others to impede calculation of their income, the indictment said.

Groups of brothers

Most of the defendants belong to four groups of brothers identified by their names: Othman, Mohamed, Yassin and Mahmoud.

They own tobacco stores in the Twin Cities and concealed the revenue and expenses of those stores or the identities of the people deriving economic benefit from their operation, according to the indictment.

At least two of the defendants already have pleaded guilty to federal charges in connection with cigarette sales.

Zuhair Wazwaz, also known as Anthony Stallone, pleaded guilty in 2004 to mail and wire fraud. Adel Salem pleaded guilty that same year to mail fraud. They pleaded guilty to ordering nearly $1 million in cigarettes with no intention of paying for them.

The other defendants are Houd Othman Wazwaz, Fares Othman Wazwaz, Taleb Mohamed Wazwaz, Kennedy Mohamed Wazwaz, Sabry Mohamed Wazwaz and Ziad Mahmoud Wazwaz.

Othman Majed Wazwaz and Kamil Madfoun Al-Esawi are charged only with conspiracy.

Defendant ‘shocked’

Defense attorney Richard Kyle said his client Kamil Madfoun Al-Esawi simply worked as a cashier at one of the stores.

“My client is shocked that he’s named in this indictment,” Kyle said. “He’s not a member of this Wazwaz family. … He has no involvement. He’s named in one of the 40 counts. We just don’t get it.”

Kyle said Al-Esawi had hired him during the investigation.

“Quite frankly, I thought, I was very surprised that he’d ever be named in an indictment.”

Do your smoker math before blowing smoke

January 9, 2006

Regarding the Jan. 3 letter “Smokers’ liability not recouped by tax” by Dave Johnson of Hurst, Texas, Johnson’s ignorance is driven by his hatred of smokers and puts the cost of health care for smokers “at least $50 per pack.” The U.S. Centers for Disease Control and Prevention also falsely puts the cost at $7.15 per pack.

The Congressional Research Service was ordered by the U.S. Congress to find the actual cost per pack for the health care of smokers. Dr. Jane Gravelle from the CRS reported these numbers back to Congress.

If the tax on a pack of cigarettes was $1 and all health care of smokers was paid by the government, 66 cents of the dollar tax would go into the general fund and 33 cents would go to smokers’ health care. This is public record but outrageous and downright lies keep making it into the media. Do your homework, Johnson, before you repeat such hate and false statements against 50 million Americans smokers, voters that have been massaged for over a decade by anti-smoking activists to the point of “creating the hatred” of this minority group of Americans. Stop now.

Archie Anderson
Coon Rapids, Minn.

Subject: Response for cigarette tax bill 

Sep 21, 2005   
 
“Minnesota Department of Revenue,
To whom it may concern.

I have recently received a tax due statement for some alleged internet
purchases. This is a letter stating my protest and appeal of said taxes. The
reasons for this are as follows.

1. The official first notice I received had been dated wrong. It had a date of
2004 on it and I didn”t receive it until July of 2005.See enclosed copy.It asked
for an estimate of taxes owed from May of 2001 to May of 2005. Then I received
another more threatening letter stating since I didn”t respond that you are now
charging me penalties and interest.

2. I would like to see copies of invoices for receiving the alleged purchases
with my signature on them.

3. The website in question had stated previously in the legal info section that
you can legally purchase cigarettes from them and in addition all taxes are
included in the price shown.

4. I have purchased a few items from websites over the years and assumed that
these companies that sell products on-line would be knowledgeable about laws
regarding collection of taxes from the consumers. They are responsible to make
payment to the appropriate state taxing agencies.

5. The Constitution of the United States…Interstate Commerce Clause in Article
1,Section 8 states – “No Tax or Duty shall be laid on Articles exported from any
state.No Preference shall be given by any Regulation of Commerce or Revenue to
the Ports of one State over those of another;nor shall Vessels bound to, or
from, one State, be obligated to enter, clear, or pay Duties in another.”

6. The Jenkins Act of 1948 was created to keep distributors from driving
truckloads of black market cigarettes from one state to another. This was to stop
the resale “for profit” as is stated in Sec 375 (a). Internet customers are not
distributors and this law should not apply to them.  Also no sales of alleged
cigarettes were sold for a “profit.”  If this was the case, the Federal
Legislators would not have introduced Senate bill S.1177 to change the wording
of the Jenkins Act to include internet consumers among many other changes.  This
bill has passed on Jan 2004.  But the companion bill from the House (H.R. 2824) is
still tabled.  So as of yet there are no changes to the original Jenkins Act.

7. The Governor of WI…Mr. Jim Doyle has understood this and has stopped pursuing
his constituents on July 21,2005. He has also demanded the State return collected
revenues to be returned to the consumers on July 30,2005.Actions are pending on
this matter.

8. Are you pursuing “all” internet sales or just certain ones?  Is it fair to
target one persons internet purchases and not another?  What about sales from
catalogs, EBay, Amazon Book, or health needs, Christmas and Birthday purchases by
our Seniors,home bound,poor,and rural residents?  Or are they next on your
radar?  Did not the U.S. Congress make the internet tax-free for the time
being?  That is unless you are purchasing from a company that has locations in the
state you reside in.

Those are the reasons I am protesting this and am prepared to use all
means, court, newsprint, and TV to make the Public aware of the States bullying
tactics, targeting certain sales, and how many of our residents, (mostly the
older, home bound, poor, and rural) may be targeted soon too.

In addition to this, I have stopped all internet credit card purchases since July
2005.

Thank you
Dan Wagner
 

(c)  2005 The Smoker’s Club, Inc. Please repost with link back to this original article.