Seattle – A 43-year-old owner of three Puyallup tribal smoke shops was sentenced late Friday, December 10, 2021, in U.S. District Court in Seattle to 14 months in prison for a sophisticated money-laundering scheme designed to evade state taxes on smokeless tobacco products, announced U.S. Attorney Nick Brown. Anthony Edwin Paul was ordered to pay $1,764,818 in restitution to the Washington State Department of Revenue, plus a $5,000 fine. U.S. District Judge James L. Robart told Paul, “Money laundering is an integral part of criminal activity…. You turned the key that starts this conspiracy.”
“This sophisticated scheme to avoid state tobacco taxes harms all our residents by cutting into state funds used to pay for healthcare and treatment for tobacco related illnesses,” said U.S. Attorney Nick Brown. “The scheme allowed non-tribal tobacco vendors to have a sales advantage over other retailers—encouraging tobacco use, and boosting their profit while they avoided paying state taxes.”
“Mr. Paul conspired to defraud the state for his own greed, cheating Washington State residents out of millions of dollars that otherwise would have been invested into services for the community,” said Bret Kressin, Special Agent in Charge of IRS Criminal Investigation (IRS-CI), Seattle Field Office. “Financial fraud and tax evasion are not victimless crimes, and IRS-CI will continue to investigate and bring to justice those who choose to commit these offenses.”
According to records filed in the case, between 2009 and 2017, Paul’s smoke shops on the Puyallup reservation sold significant quantities of tobacco products to TK Mac, a non-tribal tobacco distributor. Most of the sales were in cash, and TK Mac failed to report the purchases to the state, thus avoiding millions of dollars in excise taxes. When TK Mac then resold the products for cash, the company had a problem, since large deposits of cash would have triggered state scrutiny of its tobacco business. So beginning in 2013 and continuing until 2017, Paul and his coconspirators engaged in a money-laundering scheme: Paul’s tribal smoke shops wrote checks to TK Mac as if the tribal smoke shops had purchased tobacco products from the non-tribal store. In fact, TK Mac simply provided the tribal smoke shops with large amounts of cash equal to the checks. No tobacco products changed hands, but TK Mac received an excise tax credit. As a result of this cash-for-check scheme, Washington State suffered losses of roughly $3.86 million. The overall scheme caused the state to incur several more million dollars’ worth of losses.
Paul had an interest in the success of TK Mac, as he had made loans to the owners of the non-tribal retail business, TK Mac, of nearly $2 million. The owners of TK Mac, Hyung Il Kwon and Tae Young Kim, have also entered guilty pleas for their roles in the scheme. One of the employees in Paul’s tribal smoke shops, Theodore Kai Silva, has also pleaded guilty. Judge Robart will sentence Kwon, Kim, and Silva in January 2022.
Following the indictment of Paul’s coconspirators, the government seized more than $5 million from Kwon and Kim. The amount of restitution left owing from the cash-for-check scheme is $1,764,818. Judge Robart ordered Paul to pay that amount as restitution (joint and several with Kim and Kwon), along with the $5,000 fine.
The case was investigated by IRS-CI, with assistance from Homeland Security Investigations (HSI).
The case was prosecuted by Assistant United States Attorneys James Oesterle and Jonas Lerman.
Engaging in outreach in order to prevent crime, respond to community needs, and promote good citizenship.
Making sure that victims of federal crimes are treated with compassion, fairness and respect
Our nation-wide commitment to reducing gun crime in America