Fairfield Man Admits Role In $5.8M Cigarette Tax Scheme: Feds

FAIRFIELD, CT — A Fairfield man faces up to 20 years in prison for his role in a scheme to defraud the state of Connecticut of more than $5.8 million in taxes on tobacco products, according to authorities. Rishi Malik, 46, pleaded guilty Tuesday in New Haven federal court to charges related to his role in the conspiracy to defraud the state of taxes due on tobacco products imported into Connecticut, U.S. States Attorney for Connecticut John H. Durham announced.

Connecticut imposes tax on imported tobacco products for distribution within the state. Tobacco amounts purchased, and taxes due, are reported on Forms OP-300, which are filed with the Connecticut Department of Revenue Services, according to authorities.

For several years until 2012, Malik and a partner operated Connecticut Discounts LLC, a tobacco wholesale business based in Bridgeport. Through that company, Malik obtained tobacco products from out-of-state suppliers and distributed the products to a network of clients who offered tobacco products for retail sale, according to authorities.

“While operating Connecticut Discounts, Malik caused OP-300 forms to be filed with the Connecticut Department of Revenue Services, which underreported the amount of tobacco he imported into the state for distribution,” according to a press release from the U.S. States Attorney’s Office. “In June 2012, Malik sold Connecticut Discounts to Pavan Vaswani, who 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. Malik sometimes drove to Pennsylvania to pick up products that he delivered to KDV in Connecticut. He also participated in making orders, and sometimes delivered payments in cash.”

Between January 2013 and April 2017, KDV acquired almost $12 million in tobacco products, primarily cigars and other products, from suppliers in Pennsylvania, and distributed these products to hundreds of customers in Connecticut that stocked tobacco products for retail sale. To sign up for Fairfield breaking news alerts and more, click here.

“On the OP-300 forms that Vaswani filed with the Department of Revenue Services on behalf of KDV, the amounts reported were a small fraction of what KDV actually acquired,” according to the press release. “Through this scheme, Vaswani failed to report approximately $5,821,057 in tax to the State of Connecticut. In 2014, Malik registered Discount Deals, LLC, with an address in Sciota, Pennsylvania. Malik held out Discount Deals to be a tobacco distribution business. However, the unit he rented was not a space for a legitimate tobacco business and was maintained to create the appearance that Discount Deals was a legitimate Pennsylvania-based tobacco wholesaler.

“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 made no tax payments to the State of Connecticut between 2014 and 2017, and approximately $400,000 in smokeless tobacco tax was not reported to Connecticut or other states.”

Malik and Vaswani were arrested on Jan. 11, 2018.

Malik pleaded guilty to one count of conspiracy to commit wire fraud and to violate the Contraband Cigarette Trafficking Act (“CCTA”), 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 on Jan. 23, 2019.

Vaswani, 40, of West Haven, pleaded guilty in August to the same offenses. He awaits sentencing.

Both Malik and Vaswani have agreed to a restitution order of $5,821,057. Malik and Vaswani are released on bonds pending sentencing.

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