A federal judge on Wednesday sent a tobacco wholesaler to prison for three years for his role in a scheme to avoid paying more than $5.8 million in state taxes.
U.S. District Court Judge Janet C. Hall imposed the sentence on Rishi Malik, 46, a citizen of India who lives in Fairfield, at a court proceeding in New Haven. After his prison term, Malik will be on supervised release for three years, and he faces possible deportation.
Hall also ordered Malik to pay $5.8 million in restitution. Malik entered a guilty plea in October to one count of conspiracy to commit wire fraud and to violate the Contraband Cigarette Trafficking Act. Malik, who is free on $1.2 million bond, must report to the federal Bureau of Prisons on March 13.
Assistant U.S. Attorneys Jennifer R. Laraia and Michael S. McGarry, who prosecuted the case, asserted in a pre-sentencing document that Malik was in a “leadership” role within the conspiracy.
“He played an instrumental role in planning and organizing the fraud, exercised control and authority over others and played a significant role in the decisions made regarding the criminal actions,” the government stated.
Prosecutors asserted the scheme allowed those involved to sell tobacco products for unjustly competitive prices, and they asked for a sentence that would send a message that “fraud in the industry will be punished severely.”
Defense attorney John Gulash of Bridgeport, in asking for a downward departure from sentencing guidelines, said his client lacked any prior criminal history. He also noted Malik has started a legitimate new business delivering prepared Indian vegetarian cuisine. He further asserted his client played a lesser role than his co-defendant.
“He bears an incredible guilt and embarrassment as a result of his choices,” Gulash said in the pre-sentencing document.
The tax money was owed on tobacco products which Malik imported into the state, according to Thomas Carson, a spokesman for the U.S. Attorney’s office.
Malik and a business partner had operated a Bridgeport-based tobacco wholesale business called Connecticut Discounts LLC for years, up until 2012. According to federal prosecutors, Malik regularly obtained tobacco products from out-of-state suppliers and then distributed these products to retailers such as delis, mini-marts and gas stations.
Malik under-reported the amount of imported tobacco on forms which he was required to file with the Connecticut Department of Revenue Services, court documents show.
In 2012, Malik sold the business to Pavan Vaswani, who renamed it KDV Discounts LLC.
Despite the sale, for the next five years, Malik assisted Vaswani in importing tobacco from out-of-state suppliers, including by driving to Pennsylvania, making orders, and delivering cash payments, according to federal prosecutors. The company acquired about $12 million in tobacco products from out of state, which was then distributed to retailers for sale in Connecticut. According to the U.S. Attorney’s office, Vaswani reported only a small fraction of the imported tobacco on required forms, resulting in the loss of tax money to the state.
In 2014, Malik formed the business Discount Deals LLC out of Pennsylvania, which he reported 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 the next three years, Malik used Discount Deals to buy more than $1 million in smokeless tobacco products from Pennsylvania suppliers, with much of the products going to KDV for distribution in Connecticut, documents show.
Agents with the Bureau of Alcohol, Tobacco, Firearms and Explosives arrested Malik and Vaswani in January 2018.
Vaswani, of West Haven, pleaded guilty in August to the same offenses, and he awaits sentencing.
Contact Michelle Tuccitto Sullo at msullo@NewHavenBiz.com
