Anchorage, Alaska - U.S. Attorney Karen L. Loeffler today presented a check for $1,110,559 to Anchorage Mayor Ethan Berkowitz in a ceremony held at the United States Attorney’s Office. The check represents proceeds of the forfeiture of funds obtained through seizure warrants executed in the investigation of six individuals for various crimes arising out of a scheme to defraud the Municipality of Anchorage (MOA) of cigarette taxes owed for sales within the MOA. Pursuant to plea agreements with two of the defendants the monies were forfeited to the United States Treasury. Then through a restoration request, the Attorney General restored the approximately 1.1 million dollars to the Municipality as payment of restitution ordered at sentencing.
Previously, on March 18, 2015, U.S. District Judge Sharon L. Gleason ordered Michael Butler, 44, along with Sun Sims, 52, Kyong Hee Kim, 57, Jae Ho Lee, 60, Jae Gak Lee, 62, and Jerry Lee, 60, to pay a total of $2,007, 250, plus interest, in restitution to the Municipality of Anchorage following their convictions on charges that they were participants in a conspiracy to defraud the MOA by evading the payment of cigarette excise tax. The conspirators were indicted on July 18, 2013, on charges including mail fraud, conspiracy to commit money laundering, and conspiracy to make false statements regarding the distribution of cigarettes. Kyong Hee Kim, Sun Sims, Kimberly Sims, Jae Ho Lee, Jae Gak Lee, and Jerry Lee previously pleaded guilty in U.S. District Court for their roles in the conspiracy and other criminal violations. Michael Butler was convicted at trial in November 2014.
According to the court documents, Michael Butler and Sun Sims operated and managed Up in Smoke, located in the MOA, and Golden Eagle Tobacco and Longmere Lake Grocery and Liquor, both located outside the MOA. Because they owned Golden Eagle Tobacco and Longmere Lake Grocery and Liquor, Butler and Sims could legitimately purchase MOA excise tax exempt cigarettes from tobacco wholesale distributors located in the MOA, but only if those cigarettes were actually transported outside of the MOA and offered for sale at those two stores. However, cigarettes that they purchased within the MOA and intended to sell at Up in Smoke or distribute to others within the MOA were not excise tax exempt.
Between 2009 and Oct. 10, 2012, Michael Butler and Sun Sims used their Golden Eagle Tobacco and Longmere Lake Grocery and Liquor store accounts with tobacco wholesale distributors within the MOA to purchase excise tax exempt cigarettes that they intended to sell and distribute within the MOA. Thus, they avoided paying the MOA excise tax and increased their own profits.
The other co-conspirators paid a fee to Michael Butler and Sun Sims for the purchase of excise tax exempt cigarettes. They paid this fee for the tax exempt cigarette in an effort to avoid paying the tax owed to the MOA. Butler and Sims would collect payment from Kyong Hee Kim and other retailers. They would then convert the money collected into cashier’s checks that appeared to be purchased by either Golden Eagle Tobacco or Longmere Lake Grocery and Liquor. They then used these cashier’s checks to purchase more tax exempt cigarettes, which they then delivered to the following retail stores within the MOA:
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Up in Smoke, owned and operated by Michael Butler and Sun Sims and managed by Kimberly Sims
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Mini Stop, owned and operated by Kyong Hee Kim
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Party Time Liquor, owned and operated by Jae Gak Lee
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Cheap Smokes, owned and operated by Jae Ho Lee
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Lucky Seven Foodmart, owned and operated by Jerry Lee
The defendants received the following sentences:
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Michael Butler sentenced on 3/13/15 to 36 months incarceration, 3 years supervised release.
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Sun Sims sentenced on 2/4/15 to 34 months incarceration, 3 years supervised release, $18,000 fine.
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Jae Gak Lee sentenced on 2/2/15 to 16 months incarceration, 3 years supervised release, $100,000 fine.
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Jae Ho Lee, sentenced on 1/21/15 to 16 months incarceration, 3 years supervised release.
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Kimberly Crandell, sentenced on 1/21/15 to 3 years’ probation, $1,500 fine.
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Jerry Lee, sentenced on 1/20/15 to 9 months incarceration, 3 years supervised release.
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Kyong Hee Kim sentenced 12/4/14 to 5 years’ probation.
Assistant U.S. Attorney Stephan A. Collins of the U.S. Attorney’s Office, District of Alaska, prosecuted the case. The case was investigated by the Internal Revenue Service Criminal Investigation (IRS-CI), Alcohol Tobacco and Firearms (ATF), and the Anchorage Police Department.
Source: U.S. Department of Justice, Office of the United States Attorneys
