SACRAMENTO, Calif. - On Dec. 13, 2018, a federal grand jury returned a 28‑count indictment against Rahman Lakhani, 40, of Naperville, Illinois; N. Ali Enterprises Inc., an Illinois corporation; and 21st Century Distribution Inc., a Nevada corporation, charging them with committing mail and wire fraud, U.S. Attorney McGregor W. Scott announced.
The indictment was unsealed after the arrest of Lakhani on Thursday.
“ATF defines tobacco diversion as the trafficking of tobacco products in avoidance of Federal, State or foreign taxes or in violation of Federal, State or foreign law," said ATF, San Francisco Field Division, Special Agent in Charge Ray Roundtree. “ATF and the California Department of Tax and Fee Administration worked diligently to put an end to the defendants unlawful acts of tobacco trafficking. Their actions resulted in a loss of millions of dollars in excise taxes for the state of California and the programs those taxes are used to help. ATF is committed to enforcing the law to ensure that the state of California is not a victim of this crime and that everyone is following the rules for the operation of their business."
“Tax evasion hurts all of us by reducing revenue funding California’s essential state and local services," said CDTFA Director Nick Maduros. “Nearly 90 percent of the taxes collected on cigarettes and tobacco products are earmarked to fund important programs, including First 5 California. The CDTFA is committed to combating tax evasion to support California’s communities."
According to court documents, between August 2015 and April 2018, the defendants devised a scheme to avoid paying excise tax on approximately $26,585,000 worth of tobacco products other than cigarettes such as cigars, chewing tobacco and leaf tobacco called “Other Tobacco Products" or OTP. Lakhani owned and operated N. Ali Enterprises and 21st Century Distribution and used them to sell OTP to companies in California, on which all excise tax had purportedly been paid. The result of the scheme was a loss of approximately $5 million to $10 million to the State of California.
This case is the product of an investigation by the Bureau of Alcohol, Tobacco, Firearms and Explosives along with the former California State Board of Equalization, sections of which are now the California Department of Tax and Fee Administration. Assistant U.S. Attorneys Michael D. Anderson and Rosanne L. Rust are prosecuting the case.
If convicted, Lakhani faces a maximum statutory penalty of 20 years in prison and a $250,000 or twice the gross loss or gain. If convicted, N. Ali Enterprises Inc. and 21st Century Distribution face up to five years of probation and a $500,000 fine or twice the gross loss or gain caused by the offense. The charges are only allegations; the defendants are presumed innocent until and unless proven guilty beyond a reasonable doubt.
Source: U.S. Department of Justice, Office of the United States Attorneys
