What’s on your Fall #CTBucketList?

Tobacco wholesaler sentenced to 3 years for defrauding Connecticut of $5.8 million in taxes

New Haven Federal Court

NEW HAVEN — A Fairfield man has been sentenced to three years in prison for defrauding the state of nearly $6 million in taxes.

Rishi Malik, 46, a citizen of India residing in Fairfield, was sentenced Wednesday 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. Malik was ordered to pay restitution of $5,821,057.

According to court documents and statements made in court, 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.

Officials said in a statement, “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.  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.”

Malik sold the business to Pavan Vaswani in June 2012. Vaswani continued the tobacco wholesale business under the name KDV Discounts, LLC. Officials said that 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 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.

Officials said, “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.  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 $5,821,057 in tax to the State of Connecticut.”

They went on to say, “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 January 11, 2018.

On October 30, 2018, Malik pleaded guilty to one count of conspiracy to commit wire fraud and to violate the Contraband Cigarette Trafficking Act (“CCTA”), and one count of wire fraud.

On August 21, 2018, Vaswani, of West Haven, pleaded guilty to the same offenses.  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 term.

 

Notice: you are using an outdated browser. Microsoft does not recommend using IE as your default browser. Some features on this website, like video and images, might not work properly. For the best experience, please upgrade your browser.