Conn. tobacco wholesaler guilty in $5.8 million tax fraud scheme

A Connecticut man has pleaded guilty in a scheme to defraud the state of more than $5.8 million in taxes due on imported tobacco products. According to a Department of Justice press release, Rishi Malik of Fairfield operated Connecticut Discounts LLC, a Bridgeport-based tobacco wholesale business, with a partner.

The government said that Malik, 46,used the company to obtain tobacco products from out-of-state suppliers and distributed the products to a network of clients offering them for retail sale. During that time, Malik filed OP-300 forms with the Connecticut Department of Revenue Services, which underreported the amount of tobacco he imported into the state for distribution, the government said.

In June 2012, Malik sold his company to Pavan Vaswani, 40, of West Haven, who, according to the press release, continued the tobacco wholesale business under the name KDV Discounts, LLC. From approximately June 2012 to April 2017, Malik frequently assisted Vaswani in importing tobacco products from out-of-state suppliers, including suppliers in Pennsylvania.

Both men were arrested on Jan. 11.

The press release said that between January 2013 and April 2017, KDV acquired almost $12 million in tobacco products from suppliers in Pennsylvania, and distributed these products to hundreds of customers in Connecticut that stocked tobacco products for retail sale. According to the press release, through the OP-300 form scheme, Vaswani failed to report approximately $5,821,057 in taxes to the state.

Malik registered Discount Deals, LLC in 2014 with an address in Sciota, Pennsylvania as a tobacco distribution business.  However, according to the press release, the unit he rented was not a space for a legitimate tobacco business.

The press release said that between 2014 and at least April 2017, to subvert other federal regulations regarding interstate transport of smokeless tobacco, Malik used Discount Deals to purchase more than $1.1 million in smokeless tobacco products from Pennsylvania suppliers.  A substantial amount of these smokeless tobacco products were provided to KDV for distribution in Connecticut.  Discount Deals, the government said, made no tax payments to Connecticut between 2014 and 2017, and approximately $400,000 in smokeless tobacco tax was not reported to Connecticut or other states.

Malik pleaded guilty to one count of conspiracy to commit wire fraud and to violate the Contraband Cigarette Trafficking Act, an offense that carries a maximum term of imprisonment of five years, and one count of wire fraud, an offense that carries a maximum term of imprisonment of 20 years.  He is scheduled to be sentenced by U.S. District Judge Janet C. Hall on Jan. 23.

Vaswani, 40 of West Haven, pleaded guilty to the same offense and awaits sentencing. Both Malik and Vaswani have agreed to a restitution order of $5,821,057 and are released on bonds pending sentencing.

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