Attorney General Martha Coakley's Office Announces Indictments Against Former East Longmeadow Family in Connection with Not Paying Nearly $163,00 in Taxes on Illegally Sold Cigarettes
The Zhengs' activity was referred to the Attorney General's Office by the United States Postal Inspection Service (USPIS), which had tracked shipments from a Seneca Nation tobacco distributor to the Zheng residence in East Longmeadow. A joint investigation by the Attorney General's Office, Massachusetts Department of Revenue (DOR), USPIS and the Bureau of Alcohol, Tobacco and Firearms and Explosives (ATF) determined that these packages contained unstamped cigarettes being sold by the Zhengs at their restaurant in Springfield. In August 2008, the joint investigation executed search warrants on the Zhengs' residence and restaurant, seizing more than 12,000 cigarettes in packs that were not properly marked with the Commonwealth's excise tax stamp, but rather an identifying stamp of the Seneca Nation, a Native American reservation in New York state.
Authorities believe that in order to conceal the number of purchases made, the Zhengs allegedly had the cigarette packages delivered to multiple addressees, both real and fictional, in their hometown. The Zhengs allegedly sold the cigarettes they purchased from the Seneca Nation at low prices set to undercut lawful retailers in the area. Authorities allege that the scheme was primarily carried out by the owner of the restaurant, Jin Zheng, and his sister Mei Zhen Zheng and her husband Liang Fu Xu.
In order to legally sell cigarettes in Massachusetts, tobacco wholesalers distributing to retailers in the state are obligated to put a stamp/sticker on all packs of cigarettes to demonstrate that the Massachusetts excise tax has been paid. These wholesalers, or "stampers", must purchase these stamps from the Commonwealth, which constitutes the mandated excise tax. When a retailer takes possession of the cigarettes, the stamp is proof that such a tax has been paid. In order to insure that this law is obeyed, retailers have the obligation to only purchase cigarettes from authorized Massachusetts "stampers." Authorities believe that as a result of the Zhengs' alleged activities, it is estimated that the Commonwealth was defrauded of nearly $163,000 in unpaid cigarette excise taxes.
Investigators also discovered that Jin Zheng failed to report the receipts from the sale of unstamped cigarettes on his personal income tax or his restaurant's sales tax returns for the years 2005 through 2008.
A Hampden County Grand Jury returned indictments against the Zhengs late yesterday. They are scheduled to be arraigned in Springfield Superior Court at a later date.
The case is being prosecuted by Assistant Attorney General Michael Pine of Attorney General Martha Coakley's Corruption and Fraud Division, and was investigated by Massachusetts State Police assigned to the Attorney General's Office. Investigator Tom Nowicki from DOR, Inspector Gene Griffin from USPIS, and Special Agent Marc Maurino from ATF led the investigation of this case for each of the partnering agencies.
MEDIA CONTACTS FOR COOPERATING AGENCIES:
James McNally (ATF)
Bob Bliss (DOR)
Bernadette Lundbohm (USPIS)