March 15, 2019

Tax evasion scheme nets tobacco wholesaler prison term

PHOTO | New Haven Biz
PHOTO | New Haven Biz
U.S. District Court in New Haven

A tobacco wholesaler was sentenced Wednesday to 18 months in prison for defrauding the state of Connecticut out of $5.8 million in taxes.

In a court proceeding in U.S. District Court in New Haven, Judge Janet C. Hall imposed the punishment on Pavan Vaswani, 40, a citizen of India who lives in West Haven.

After Vaswani serves his prison sentence, he will be on supervised release for two years and faces possible deportation. Vaswani is free on $250,000 bond, but must report to prison May 30.

Vaswani pleaded guilty last August to one count of conspiracy to commit wire fraud and to violate the Contraband Cigarette Trafficking Act ("CCTA"), and one count of wire fraud.

Vaswani's co-defendant, Rishi Malik, 46, a citizen of India living in Fairfield, was sentenced on Feb. 13 to three years in prison. Hall ordered the two defendants, who were arrested in January 2018, to pay $5.8 million in restitution.

Vaswani's defense attorney, Frank Riccio of Bridgeport, in asking for leniency, said his client had no prior arrest history.

"Although his conduct spanned a significant period of time, it appears to be a deviation from an otherwise law-abiding life," Riccio wrote, in a pre-sentencing document.

"Mr. Vaswani's experience in this case has led to nothing but misery," Riccio added. "He is loathe to repeat this experience and would discourage others who think it is worth the risk of getting caught."

The state of Connecticut imposes tax on tobacco products imported into the state for distribution here.

Malik and a business partner had operated Connecticut Discounts LLC, a tobacco wholesale business based in Bridgeport for years, up until 2012. According to the U.S. Attorney's office, 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.

Malik under-reported the amount of tobacco he imported on forms filed with the Connecticut Department of Revenue Services, court documents show.

In June 2012, Malik sold the business to Vaswani. Vaswani, with Malik's assistance, continued the tobacco wholesale business under the name KDV Discounts, LLC, according to the government.

From early 2013 through 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 retailers in Connecticut.

According to federal prosecutors, Vaswani reported a fraction of the imported tobacco on required forms, resulting in a loss of tax money to the state.

In 2014, Malik registered Discount Deals, LLC, with an address in Pennsylvania, and he reported it as a tobacco distribution business. However, federal prosecutors assert this was inexpensive space left vacant and set up solely for the purpose of circumventing federal regulations dealing with interstate transport of smokeless tobacco.

For about three years, Malik used his business to purchase more than $1.1 million in smokeless tobacco from Pennsylvania suppliers, and a substantial amount of these products were provided to KDV for distribution in Connecticut, court documents show.

Contact Michelle Tuccitto Sullo at msullo@newhavenbiz.com

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