A citizen of India residing in Fairfield was sentenced yesterday in New Haven federal court to three years of imprisonment, followed by three years of supervised release for defrauding the state of Connecticut of more than $5.8 million in taxes due on tobacco products imported into the state.
The state of Connecticut imposes tax on tobacco products imported into Connecticut for distribution within Connecticut. Tobacco amounts purchased, and taxes due, are reported on Forms OP-300, which are filed with the Connecticut Department of Revenue Services.
Rishi Malik, 46, operated Connecticut Discounts LLC, a tobacco wholesale business based in Bridgeport, for several years until 2012. 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.
While operating Connecticut Discounts, Malik caused OP-300 forms to be filed with the Connecticut Department of Revenue Services that underreported the amount of tobacco he imported into the state for distribution.
Malik sold Connecticut Discounts to Pavan Vaswani in June 2012; Vaswani continued the tobacco wholesale business under the name KDV Discounts LLC. Malik frequently assisted Vaswani in importing tobacco products from out-of-state suppliers, including suppliers in Pennsylvania, from approximately June 2012 to April 2017. Malik frequently 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.
KDV acquired almost $12 million in tobacco products from suppliers in Pennsylvania between January 2013 and April 2017, and distributed these products to hundreds of customers in Connecticut that stocked tobacco products for retail sale. 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. Through this scheme, Vaswani failed to report approximately $5.8 million in tax to the state of Connecticut.
Malik registered Discount Deals LLC with an address in Sciota, Pennsylvania, in 2014. 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. 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 between 2014 and at least April 2017. 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 was ordered to pay restitution of more than $5.8 million.
Malik pleaded guilty to one count of conspiracy to commit wire fraud and to violate the Contraband Cigarette Trafficking Act, and one count of wire fraud, on Oct. 30, 2018.
Vaswani, a West Haven resident, pleaded guilty to the same offenses on on Aug. 21, 2018. He awaits sentencing. Malik, who is released on $1.2 million bond, is required to report to prison on March 13, 2019. Malik faces immigration proceedings when he completes his prison sentence.
