East Longmeadow Man, His Sister and Brother-in-Law Plead Guilty, Ordered to pay $81,000 in Fines in Connection with Orchestrating Cigarette Excise Tax Evasion Scheme
Jin Zheng, age 31, the absentee owner of the Fu Soun Restaurant located in Springfield, pled guilty to charges of Possession with Intent to Sell over 12,000 Unstamped Cigarettes, Evasion of Cigarette Excise Taxes, Sales Tax Evasion, Filing False Sales Tax Returns and Filing False Income Tax Returns. Following the change of plea, Superior Court Judge Daniel Ford sentenced Jin Zheng to serve one year in the House of Correction, with the sentence suspended for a probationary period of five years. Judge Ford also ordered Zheng to pay a $75,000 fine.
Jin Zheng's sister Mei Zheng, age 39, and her husband Liang Fu Xu, age 36, both pled guilty to charges of Possession with Intent to Distribute Unstamped Cigarettes and Failure to Pay Cigarette Excise Tax. Judge Ford sentenced Xu to serve five years of probation and was ordered to pay a $5,000 fine. Mei Zheng was sentenced to three years of probation and must pay a $1,000 fine.
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), Massachusetts State Police, 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 investigators 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.
In order to conceal the number of purchases made and avoid suspicion, the Zhengs had the cigarette packages delivered to multiple addressees, both real and fictional, in their hometown. The Zhengs sold the cigarettes they purchased from their distributor at lower prices set to undercut lawful retailers in the area. 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."
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 on September 15, 2009. On October 5, 2009, Jin Zheng was arraigned in Hampden Superior Court where he pled not guilty and was released on personal recognizance. On November 4, 2009, both Mei Zen Zhen and Liang Fu Xu were arraigned in Hampden Superior Court where they entered pleas of not guilty and were released on personal recognizance. Today, all three defendants pled guilty and were sentenced.
The case was prosecuted by Assistant Attorneys General Lee Hettinger and Michael Pine, both of Attorney General Martha Coakley's Corruption and Fraud Division with assistance provided by Victim Witness Advocate Shannon Legrice. It 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)