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Eight people were indicted last week on charges of mail fraud, money laundering conspiracy, conspiracy to make false statements regarding the distribution of cigarettes and aggravated structuring currency transactions.
Michael Butler, 42, Sun Sims, 50, Kimberly Sims, 29, In Sook Baik, 28, Kyong Hee Kim, 55, Jae Ho Lee, 58, Jae Gak Lee, 60, and Jerry Lee, 58, were charged in a single 20-count indictment. The indictment also alleges forfeiture of funds totaling over $1 million dollars and seeks a money judgment in the amount of $3.6 million dollars.
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According to lead Assistant U.S. Attorney Stephan A. Collins, the indictment explains that the Municipality of Anchorage imposes an excise tax upon each cigarette purchased within the municipality. The tax is approximately equal to $2.20 per pack of cigarettes. The Municipality provides for an exemption to this excise tax for cigarettes that merchants purchase within the municipality and that are then transported outside of the municipality for resale. The Kenai Peninsula Borough does not impose an excise tax upon cigarettes sold within the borough. Michael Butler and Sun Sims owned and operated Up In Smoke, a tobacco shop located within the Municipality of Anchorage. In addition to Up In Smoke, Butler and Sun Sims owned and operated Golden Eagle Tobacco and Longmere Lake Liquor, both located within the Kenai Peninsula Borough. The indictment alleges that in an effort to avoid paying the municipal cigarette excise tax, Butler and Sun Sims purchased cigarettes after falsely reporting that the majority of the cigarettes were intended for sale at either of their two tobacco stores within the Kenai Peninsula Borough, when in fact those cigarettes were being sold within the municipality.
In addition to selling cigarettes within their own smoke shops, Butler and Sims sold untaxed cigarettes to In Sook Baik, Kyong Hee Kim, Jae Ho Lee, Jae Gak Lee and Jerry Lee, who all operated smoke shops within the Municipality of Anchorage. Baik owned and operated the Arctic/Tudor Shell and Mountain View Shell, where she sold cigarettes. Kim owned and operated the Mini Stop Grocery. Jae Ho Lee owned and operated Cheap Smokes. Jae Gak Lee owned and operated Party Time Liquor. Jerry Lee owned and operated the Lucky Seven Foodmart.
The indictment alleges that between 2009, and continuing up until October 10, 2012, the defendants collectively ordered and purchased approximately 12,350,000 cigarettes, intended for resale within the Municipality of Anchorage through October 10, 2012.
By falsely representing that the ultimate destination for the sale of these cigarettes was outside of the Municipality of Anchorage, the defendants caused the Municipality to lose cigarette excise tax revenue in excess of $1,375,000. During the course of this scheme, Butler, Sun Sims and Kimberly Sims collected and received fees and costs for the wholesale cigarettes totaling approximately $3.6 million dollars from the other defendants.
The indictment also alleges that while participating in this scheme, In Sook Baik evaded financial reporting requirements by structuring deposits made to Northrim Bank and Wells Fargo Bank, N.A. Baik made these deposits between January 4 and July 17, 2012, and the deposits totaled over $225,000.
The United States District Court for the District of Alaska has summoned all of the defendants to appear for their respective arraignments on August 28 and 29, 2013.
Assistant U.S. Attorney Stephan A. Collins and Special Assistant U.S. Attorney Erin W. Bradley, who presented the case to the grand jury, indicated that the law provides for a maximum total sentence of 20 years in prison for mail fraud, a fine of $250,000, or both. The law provides for a maximum total sentence of 20 years in prison for money laundering conspiracy, a fine of $500,000, or both. The law provides for a maximum total sentence of 5 years in prison for conspiracy to make false statements regarding the distribution of cigarettes, a fine of $250,000, or both. The law provides for a maximum total sentence of 10 years in prison for aggravated structuring currency transactions, a fine of $500,000, or both.