- Agreed restitution in the amount of $2,090,571.00 from $3,214,035.66 forfeited to the United States.
LOUISVILLE, Ky. - The former owner of Cigarettes Direct to You, was sentenced in U.S. District Court yesterday, to one year and one day in prison by U.S. Magistrate Judge Dave Whalin, for running an illegal retail cigarette trafficking business, announced David J. Hale, United States Attorney for the Western District of Kentucky. Prior to sentencing Israel Chavez of Louisville, agreed to pay restitution in the amount of $2,090,571 to the Kentucky Department of Revenue, from $3,214,035.66 he agreed to forfeit to the United States.
Israel Chavez, age 48, previously admitted in court that he conspired and agreed with Pedro, a/k/a Peter Bello, d/b/a, GT Northeast of Indiana/Kentucky, from January 5, 2005 through December 9, 2009, to buy and sell contraband cigarettes through internet websites and telephone call centers. By doing so, Chavez, aided and abetted by Bello, deprived the Kentucky State Department of Revenue of $2,090,571, by not paying taxes on cigarettes bought, sold, and shipped from locations within the Western District of Kentucky.
Chavez was the owner of Chavez, Inc., d/b/a, Cigarettes Direct to You (CD2U), a Kentucky Corporation located in Louisville, Kentucky. Chavez admitted in court to purchasing unstamped cigarettes, valued at $12,500,000 from Bello, for which no Kentucky tax had been paid, in order to significantly undercut the price charged for cigarettes by competing businesses which complied with state laws and paid the required taxes on cigarettes they held for sale. Further, Chavez admitted to knowing that fraudulent invoices had been created to disguise the nature of the cigarette transactions from the Kentucky Department of Revenue. This was accomplished through the creation of fraudulent invoices, which were transmitted by fax between Louisville, Kentucky, and St. Louis, Missouri, to make it appear that the cigarettes were purchased from a wholesaler in St. Louis - when, in fact, Chavez admitted to knowing that the unstamped cigarettes were from Kentucky, and that as a licensed wholesaler, Chavez was required to pay the Kentucky state tax.
According to the civil forfeiture suit, filed by the United States against Chavez, his ex-wife Pam Chavez, and their two companies Pam Chavez, Inc., and Chavez, Inc., Israel Chavez and Pam Chavez agreed to forfeit to the United States, assets including approximately $3,214,305.66 in cash and deposit accounts and approximately 10,824,192 tobacco products. Tax stamps valued at $108,000 will be returned to the Kentucky Department of Revenue.
"This ATF investigation was supported by the Kentucky Attorney General's Office of Criminal Investigations, the U.S. Postal Inspections Service and the Louisville Metro Police Department. In addition, coordination with various State Attorney Generals and their respective revenue/regulatory agencies has led to the collection of over $40 million in lost state excise taxes by states directly impacted by Chavez's illicit operations," stated ATF Louisville Special Agent in Charge Stuart Lowrey.
In a separate, but related case, Bello, age 43, of Miami, pleaded guilty to conspiracy to commit wire fraud and money laundering is scheduled for sentencing before Chief Judge Joseph H. McKinley on Feb. 3, 2014. According to the Oct. 3, 2011 indictment, returned by a grand jury meeting in Louisville, Bello created fraudulent cigarette invoices to circumvent paying Kentucky state excise taxes.
This case was prosecuted by Assistant United States Attorney Randy Ream and the civil forfeiture case was prosecuted by Assistant United States Attorney Amy Sullivan and will result in the payment of restitution to the victim. This case was investigated by the US Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF).
Source: U.S. Department of Justice, Office of the United States Attorneys
