Jun 21 2012
Calvin Phelps cigarette export schemes to avoid tobacco settlement payments of approximately $ 4980000 Mocksville entrepreneur can cost up to 43 years in prison.
At his request, Phelps is also facing an agreement with the requirement to forfeit up to $ 2 million of their money. The announcement was made in the U.S. District Court for the Northern District of Mississippi, where Phelps was the subject of a criminal investigation for nearly four years.
Christy Moore, Phelps attorney, said Friday that the sentencing hearing has not been established. According to officials with the Mississippi court, it may take from one to six months for Phelps to be sentenced. Phelps came to us unopened.
Moore said Phelps put all comments to the legal documents.
In May 2010, U.S. Attorney William Martin said Phelps and the companies under investigation “in connection with trafficking in cigarettes and other related crimes.”
Although Phelps has alternative brands Inc, Renegade Holdings Inc, a company Renegade Tobacco and leading enterprises Inc, it seems, Cutting Edge is the only one involved in the scheme.
According to the indictment filed with the U.S. Attorney Felicia Adams, Phelps conspired to defraud the U.S. government, the Mississippi and other States Parties to Master Settlement Agreement, approximately $ 5 million in fees “on the receipt, distribution and sale of cigarettes.”
Adams said Phelps took these actions are “all in order to obtain money through false and fraudulent pretenses, representations and promises.”
Phelps pleaded guilty:
• Adoption of the scheme of deception of the American government of the federal cigarette tax payments;
• Knowingly making false statements by essentially the U.S. government, as well as
• Knowingly and voluntarily conducting illegal financial transactions.
MSA, reached in 1998, imposes restrictions on the marketing of the company and requires annual payments to the states, above all, to help pay for cessation and prevention programs.
Companies benefit financially from the Phelps loophole in the MSA, which does not require small-scale producer’s no participant to make payments, which allows them to sell their cigarettes at a significant discount compared to the MSA participants.
States closed the loophole by passing laws forcing small companies to invest money in escrow in case they filed a lawsuit against the state.
As a renegade lost their competitive edge, she decided to join the MSA in 2008 to sell its cigarette brands at the national level.
According to the indictment, Phelps became the subject of the federal Bureau of Alcohol, Tobacco, Firearms and Explosives undercover operation in Guntown, Mississippi
Unbeknownst to Phelps, he began to use covert operations for the sale of Cutting Edge Dallas and Makro brands cigarettes at a lower price, avoiding the MSA payments.
“Phelps sent a cooperating witness ATF license to use it to claim the importer to export cigarettes, let them fictitious import it back to avoid the MSA payments,” according to the indictment.
Phelps told federal regulators that the cigarettes were exported and consumption abroad. But inside said containers of cigarettes for domestic sale only. False documents were filed with the export of each month.
Adams said Phelps sold 16,022 cases – or 997,320 boxes – from Makro and Dallas with a federal witness for export. Witness paid $ 3.2 million cases. Adams said that the operation is on the cutting edge, to avoid the $ 4.98 million payment MSA, or about $ 5 a box.
In January 2009, shortly after the state took advantage of renegade MSA prices, the companies were placed into Chapter 11 bankruptcy protection. After a short way out, they were placed back into bankruptcy in July 2010.
In September 2010, Phelps was accused of fraudulent transfer of $ 8.1 million, assets of four companies over time. He used the money gained from the notes to help buy Chinqua-Penn Plantation in Rockingham County, two corporate jets, the cigar-manufacturing equipment and the 2008 Maserati Quattroporte, an expert on bankruptcy renegade states in the lawsuit.
As part of bankruptcy proceedings in April auctions Chinqua Penn artifacts and furniture, as well as certain assets Phelps, raised about $ 3.6 million, including $ 3.44 million net proceeds in the estate. The six properties owned or controlled by Phelps in Davie County were sold at auction in June 2011, losing $ 1.39 million in general and $ 576,917 in net revenue in the bankruptcy estate.
Net proceeds are held in special trust, and will go to the creditors and the administrative responsibility of debts.
Phelps agreed that any money he receives from the estate will be confiscated by the U.S. government to meet the requirements of confiscation.
Jerry Burke, a man connected with the company, was convicted of aiding and abetting in fraud, false statements relating to the receipt and distribution of cigarettes and conspiracy to commit money laundering related to the sale of contraband cigarettes.
Burke, a member of Phelps’ wife, Lisa Yamaoka Phelps pleaded guilty to the charges in January 2011. He was sentenced to 34 months in prison for each charge, to be served concurrently, and been in prison since February 2011. In addition, he had to pay $ 525,000 in restitution.
Greensboro News & Record reported on Friday that Phelps is trying to prevent plantations from SunTrust Banks to exclude Inc.
SunTrust foreclosure documents filed in April, suggesting Phelps did not make regular payments on the property since the end of 2010. Bank officials said that he and his wife owes more than $ 2 million in principal, interest, and even for late payment. Phelps filed a protest and the association $ 13,917, to freeze until the issue can not be considered by the judge.
Deposit dispute relating to the National Association of Attorneys General, representing North Carolina and 15 other states, remains a legal barrier to the exit plan renegade. A hearing is set for July 17 in U.S. Bankruptcy Court in Greensboro.