Tobacco Distributor Alex Goldman Sentenced To Three Years For Tobacco Tax Fraud
- October 5, 2018 |
- By Andrew Nagy
Alex Goldman, the former president of tobacco distributor House of Oxford Inc. and the former head of Royal Gold Cigars, has pleaded guilty and been sentenced to three years in prison for conspiracy to commit tobacco excise tax fraud, the U.S. Department of Justice recently announced. According to court documents, Goldman sold nearly $36 million in untaxed tobacco products over a seven-year period, depriving California of approximately $14 million in tobacco tax revenue.
Additionally, House of Oxford, a tobacco products distributor based in New Jersey that was started by Goldman’s grandparents in the 1950s, was sentenced to two years of probation, which means that it will be subject to search and will be required to have its financial records monitored by the government. The investigation was conducted by the Bureau of Alcohol, Tobacco, Firearms and Explosives, along with the former California State Board of Equalization (now the California Department of Tax and Fee Administration).
Both House of Oxford and Goldman agreed to the civil forfeiture of approximately $14 million in assets, including cash, investments, sports cars, real estate, rare artwork and jewelry. Goldman and House of Oxford were sentenced on September 20. Goldman has been registered at the Federal Correctional Institute in Otisville, New York, and he will report there soon to begin his sentence.
"The government is making an example out of me," Goldman said today in a telephone call with Cigar Aficionado. He went on to say that he left the cigar industry in March.
From about March 2006 to April 2013, according to court documents obtained by Cigar Aficionado, Goldman, acting as an officer of House of Oxford, conspired with multiple individuals doing business in California to provide them with untaxed tobacco products knowing that those products would be sold in California without payment of state excise tax, which is illegal. During this period, California’s Other Tobacco Product tax ranged from 31 percent to 46 percent. OTP is a broad category that includes all tobacco products other than cigarettes.
According to California law, it is illegal to possess untaxed tobacco in the state unless that person has a tobacco distributor’s license from the State of California Board of Equalization (BOE). Licensed distributors must report at least once a month to the BOE the amount of tobacco sold in the state, and then pay the taxes on it shortly thereafter.
In one example outlined in the court filings, Goldman sold about $32.6 million in tobacco products to an individual described in the documents only as “M.S.” from about March 2006 through October 2008. (The identity of M.S. has been revealed in newer court documents to be Max Suh, who at the time was operating a retail store in Tennessee, but his primary customer was located in California.)
According to the court documents, “Goldman offered to ship the (tobacco) product directly to California for M.S. and to cover the cost of shipping. Goldman then shipped the product to California for M.S., but billed the product to Tennessee. The tax returns submitted by House of Oxford showed the product shipped to California, but to an address that was not licensed by BOE to possess/sell tobacco.” By shipping the product this way, the tobacco products were sold without collecting California taxes, and there was no record reported to a government agency “identifying the ultimate California recipient of the tobacco.”
The documents go on to describe how Goldman and House of Oxford continued to sell to Suh even after Goldman found out that Suh only possessed a retail business license and no distributor’s license. Suh would buy from Goldman using the business names Tobacco House, KS Wholesale, Discounted Tobacco and Cheap Cig Distributor.
Today, Suh is facing tax fraud and theft charges in Tennesse.
In another example, one of Goldman’s House of Oxford customers testified that “two of Goldman’s employees, on different occasions, educated her on how to receive product without the state’s knowledge, including instructing her to have product shipped to residences and to pay with money orders.”
In December 2011, the court documents show that Goldman met with an undercover ATF agent in Las Vegas, Nevada. During the meeting, the undercover ATF agent told Goldman that his “partner” could no longer buy tobacco products in California.
“In a recorded conversation, Goldman stated that they had to ‘collectively’ figure out how to get the undercover agent and his partner back into business,” the court documents said. “Goldman then suggested that they should consider getting a tobacco distributor’s license in Arizona,” and later he also advised that “the undercover agent should get a ‘guy’ to drive the product to Los Angeles, California.”
In 2013, when the Department of Justice began seizing Goldman’s assets, he was overseeing Royal Gold Cigars, a premium cigar division formed by Swisher International Inc., the machine-made cigar giant best known for its Swisher Sweet brand. (The brands under the Royal Gold umbrella, which include Casino Gold and Kismet, have been discontinued.) With the forfeiture of his assets, it was believed the case was closed. In a story that appeared in the May 6, 2014 edition of Cigar Insider, Goldman said that “This was a civil settlement with a federal agency regarding House of Oxford, a company in which I was a principal. That company is now closed. The settlement has no relationship to my present position within the industry, or to any other company. I am satisfied that this matter has come to a resolution.”
However, while the investigation on Goldman may have ceased, the government had other plans for the fourth-generation tobacconist.
In 2013, shortly after his assets were seized, Goldman became an informant for the ATF, according to the court filings. In a leniency letter dated June 10, 2018 that he sent to Judge Troy Nunley of the Eastern District of California, who oversaw the sentencing, Goldman wrote that “I wore a camera and microphones to a trade show. I got documents, taped conversations, and visited distributors. … At every turn I tried to find information that would be useful to the government.” According to the letter, Goldman cooperated with the government for four years.
“This case is the result of a highly successful collaborative effort involving federal and state investigators and prosecutors, working side-by-side,” said U.S. Attorney McGregor W. Scott, in a press release. “The judgment handed down today should serve as a warning to those who consider stealing from the public. We will work hard to recover those funds and ensure that those responsible are held accountable.”