Kansas Cigarette Wholesaler Charged In $25M Fraud
By CSD Staff
New 43-count federal indictment also names business associates who allegedly avoided taxes on cigarettes.
The owner of a Kansas wholesale tobacco company and his business associates have been charged in a 43-count federal indictment for a scheme to avoid paying taxes on cigarettes that cost the state of Oklahoma and Indian tribes $25 million in tax revenue, according to the U.S. Department of Justice’s Kansas District.
The investigation was triggered by the Bureau of Alcohol, Tobacco, Firearms and Explosives in April 2006, when a defendant was stopped by the Kansas Highway Patrol in Coffeyville, Kan. The man was transporting a load of cigarettes worth more than $200,000 without required documents and appropriate tax stamps.
On Friday, acting U.S. Attorney Marietta Parker announced the indictment in which the following defendants have been charged:
Gary Lester Hall, 66, of Joplin, Mo., is the president and owner of Sunflower Supply Company in Galena, Kan. The DOJ said Hall also exercised control over other business entities including Discount Tobacco Warehouse Inc. in Joplin, Mo.; National Tobacco Distributors; Rebel Industries, Inc.; Halls Collection, Inc.; Shawnee Tobacco Smoke Shop in Harrah, Okla., and Sunflower Aircraft, Inc.
Thomas Anthony Grantham, 50, of Joplin, Mo., works for Hall managing operations at Sunflower and Rebel.
Keith Dion Noe, 42, of Joplin, Mo., the accountant for Sunflower, Discount Tobacco Warehouse, Rebel and Shawnee Tobacco.
Justin Boyes, 32, of Galena, Kan., worked for Hall at Sunflower and now works for Hall at Discount Tobacco Warehouse.
Danny Ray Davis, 62, of Galena, Kan., worked for Hall at Sunflower and now works for Hall at Rebel.
Jeremy Wayne Hooker, 33, of Salina, Okla., operates the Pipestone Smoke Shop in Vinita, Okla.
James William Coble, 35, of Galena, Kan., worked for Hall at Sunflower and now works for Hall at Rebel.
Justice Michael Berry, 36, of Joplin, Mo., worked for Hall as an accountant.
Three business entities also are named as defendants: Sunflower Supply Company, Inc.; Discount Tobacco Warehouse, Inc.; and Rebel Industries, Inc.
According to the indictment, the states of Kansas and Oklahoma require every pack of cigarettes to carry a stamp showing that taxes have been paid on the cigarettes. In Oklahoma, the tax varies from a low of about 6 cents a pack to a high of $1.03 a pack depending on the location of the retail store at which the cigarettes will be sold.
In addition, the state of Kansas requires wholesalers submit monthly reports stating the number of cigarettes sold on specific dates and the location where they will be sold.
Beginning in January 2005 and continuing through May 2007, the DOJ said Hall and other defendants conspired to defraud the state of Oklahoma and Indian tribes that share in the proceeds of cigarette taxes.
Companies controlled by Hall and other defendants stamped cigarettes for sale at smoke shops in lower tax rates areas when in fact the cigarettes were sold at smoke shops in higher tax rate areas. They carried out the scheme through a variety of means including communications by Internet and fax and money wire transfers, the DOJ said.
The DOJ also alleges that the group funneled payments and orders through a third-party corporation called Gawkskey, Inc.
The government is seeking a money judgment against Hall and the conspirators for the proceeds of the crime. Personal property listed in the forfeiture allegation includes: A Hawker Beechraft Model 4000 jet aircraft, a 2006 BMW auto, and a 2007 Chevrolet Utilimaster Van, as well as various real in Missouri, Kansas and Las Vegas.
Charges in the 43-count indictment includes:
One count of conspiracy to divert cigarettes
Six counts of violating the Cigarette Trafficking Act by failing to keep accurate records
Ten counts of mail fraud involving the mailing of false monthly cigarette reports
Seven counts of wire fraud involving cigarette orders in furtherance of the conspiracy
One count of wire fraud involving the wire transfer of $967,382 from Pipestone Smoke Shop to Sunflower Supply Company
Six counts of interstate transportation in furtherance of money laundering involving the delivery of checks in payment for cigarettes
One count of transporting contraband cigarettes
One count of conspiracy to commit money laundering
Three counts of money laundering
Seven counts of engaging in unlawful monetary transactions.
Upon conviction, the alleged crimes carry penalties that include hundreds of thousands of dollars in fines and 20 or more years in prison.
UPDATE: March 28, 2009
March 28, 2009
Judge allows indicted man to keep jet
A businessman charged with tax fraud will get to keep his private jet for the time being.
A federal judge has allowed Gary Hall of Joplin, Mo., to hold onto the Hawker Beechcraft jet after Hall's business partner agreed to post property he owns in Missouri and Arkansas to cover the jet's $5 million value.
Hall is scheduled to go on trial on April 13, 2010, on a 43-count federal indictment.
He is president and owner of Galena, Kan.-based Sunflower Supply Co. He and seven other people and three businesses face a 43-count federal indictment alleging multiple counts of mail fraud, wire fraud, money laundering and conspiracy to commit money laundering.
Prosecutors claim the group committed $25 million in tobacco tax fraud against Oklahoma and American Indian tribes.
Other defendants include Thomas A. Grantham, of Joplin; Keith D. Noe, of Joplin; Justine Boyes, of Galena; Danny R. Davis, of Galena; Jeremy W. Hooker, of Salina, Okla.; Justice M. Berry, of Joplin; and James W. Coble, of Galena. Sunflower Supply, Joplin-based Discount Tobacco Warehouse and Rebel Industries Inc. are also named in the indictment.
U.S. District Judge Monti Belot last month agreed to continue the case to next year after defense attorneys said they needed more time to prepare.
The ruling also affected Hall's jet, which is listed in the indictment as a forfeitable asset if Hall is convicted.
Belot allowed Hall to substitute property he or business partner Steve Vogel own for the jet, which was seized by federal authorities when he was arrested in October.
The land includes land in Benton County, Ark.; 300 acres in Camden County near the Lake of the Ozarks in Missouri; and some of Vogel's property in Webb City. Vogel said the property in Arkansas and Webb City is planned for commercial development and proceeds from any sales of the property would be held in escrow until the case was finished.
"Gary's always been there for me," Vogel said. "It's a no-brainer. He's always helped me when I needed help."
Vogel said he believes Hall in innocent and that some in the public have unfairly convicted him without a trial.
Information from: The Joplin Globe, http://www.joplinglobe.com