Tribal smoke shop owner sentenced for $3.86M money-laundering scheme
FILE - Generic gavel on wooden table.
SEATTLE - The owner of three Puyallup tribal smoke shops was sentenced Friday for a money-laundering scheme to avoid paying state tobacco taxes.
U.S. Attorney Nick Brown’s Office says 43-year-old Anthony Paul was sentenced to 14 months for a $3.86 million laundering scheme that ran from 2013 to 2017. Paul must pay a $5,000 fine, as well as over $1.7 million in restitution.
"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 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."
Officials say starting in 2009, Paul’s smoke shops on the Puyallup reservation sold large amounts of tobacco products to TK Mac, a non-tribal tobacco distributor. Most of these sales were in cash, and TK Mac did not report these purchases to the state, which attorneys say allowed them to avoid millions of dollars in excise taxes.
TK Mac then resold the products for cash, but since they were sitting on so much money, they plotted to avoid scrutiny from the Internal Revenue Service (IRS) by having Paul’s shops write checks to TK Mac as if they were buying tobacco products from them.
In reality, no tobacco products were being exchanged and TK Mac would pay Paul’s shops the cash equivalent of the checks, leading them to receive an excise tax credit.
Attorneys note that Paul had made nearly $2 million dollars’ worth of loans to TK Mac, and this cash-for-check scheme forced losses on Washington state of around $3.86 million.
TK Mac owners Hyung Il Kwon and Tae Young Kim, and Paul’s employee Theodore Kai Silva have pleaded guilty for their role in the conspiracy. Swon, Kim and Silva will be sentenced January 2022.
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