An El Monte man faces up to five years behind bars Tuesday for participating in a scheme to defraud the United States by evading millions of dollars in federal excise taxes due on 143 million cigarettes.
Isaac Rojas, 45, pleaded guilty last year to a federal conspiracy charge for his role in the scheme that sold cigarettes domestically, but did not pay excise taxes after falsely claiming the cigarettes were leaving the U.S. on cargo ships sailing out of the ports of Los Angeles and Long Beach.
A co-defendant, Un Hag Baeg, 58, of Marina del Rey, was sentenced in May in Los Angeles federal court to 46 months behind bars for his part in the conspiracy. U.S. District Judge S. James Otero additionally ordered Baeg to pay $7.26 million in restitution to the U.S. Alcohol and Tobacco Tax and Trade Bureau.
Cigarettes sold in the U.S. are subject to a federal excise tax of $50.33 per one thousand cigarettes. This tax is generally paid by the manufacturer, but it may be avoided if the cigarettes are properly transferred to a bonded warehouse to be exported or consumed outside of the United States.
Untaxed cigarettes sold for this purpose are known as “export-only” cigarettes. When export-only cigarettes are diverted and sold in the United States, federal and state taxing authorities suffer lost excise taxes.
According to court documents, between 2012 and 2015, Rojas, Baeg and others conspired to divert 143 million export-only cigarettes from an export warehouse near the Port of Los Angeles.
The co-conspirators purchased the cigarettes under the pretext that the cigarettes would be provided to various ships sailing out of the U.S. In fact, the cigarettes were sold in the U.S., which resulted in millions of dollars in lost federal and state excise taxes.
Baeg and associates subsequently hid their fraud by preparing false paperwork indicating that the cigarettes had been delivered to the various ships. To make these bogus documents appear to be legitimate, the conspirators stamped the paperwork with fabricated rubber stamps bearing the names of cargo vessels, according to the U.S. Attorney’s Office.
The conspiracy resulted in the evasion of $7.26 million in federal excise taxes and $5.9 million in California excise taxes, officials said.
Rojas assisted Baeg by picking up the duty-free cigarettes Baeg ordered several times a week, paying for them with money provided by Baeg, and transporting the cigarettes to distribution points.