City man pleads guilty in tobacco fraud scheme
NASHUA – A city man plead guilty in federal court recently to evading state tobacco excise taxes, resulting in a payment of $400,000 to the state of New Hampshire as part of a plea agreement.
Aldean Khater, of Nashua, pled guilty in federal court Jan. 2 on one count of mail fraud, a felony, related to a scheme to evade state tobacco excise taxes. The New Hampshire Department of Revenue Administration collected the money, which Khater agreed to pay in partial restitution to the state within one week of entering the plea agreement.
However, Khater is familiar with tobacco sales, as a formally licensed wholesaler in both New Hampshire and Massachusetts, officials said. He operated Khaternet LCC and True Tobacco in Nashua. In addition, he was manager of Mass Cash and Carry in Woburn, Massachusetts, and North Billerica, Massachusetts.
Between 2012 and 2017, Khater took actions to evade paying the excise tax revenue specific to products falling under the OTP (other tobacco products) category by purchasing and shipping OTP from distributors in other states. He would then sell them at wholesale in New Hampshire and Massachusetts without paying all of the applicable excise taxes owed to the states the OTP was purchased from. Tens of thousands of dollars worth of OTP were repeatedly included in these orders at one time.
In concealing his crimes, Khater would underreport his wholesale sales of OTP to New Hampshire and Massachusetts, paying less than $130,000 in tobacco taxes over a period of about five years, officials said. This represents a small fraction of the true amount owed, officials noted.
By 2017, Khater was depositing large sums of cash into multiple bank accounts in both states, which includes more than $4 million in just one account during a 15-month period.
“Khater made false claims about his purchasing and selling practices on his website, on invoices to customers, on licensing documents filed with the New Hampshire Department of Revenue, and he lied on a number of his tax returns,” NHDRA Commissioner Lindsey Stepp said. “Schemes of any scale to defraud and deprive the state of New Hampshire and its law abiding citizens of tax revenue will not be tolerated.”
Khater was arraigned for mail fraud in U.S. District Court in Concord in April 2018. According to a report The Telegraph published in March 2018, Khater was buying tobacco products, which include loose cigarette tobacco, smokeless tobacco and cigars, in bulk from Pennsylvania, having the products shipped to his locations in Nashua and one in Massachusetts going as far back as 2011, according to court records.
According to that report, an informant purchased tobacco products from Khater, and told investigators that he would print two different receipts for his purchases, with one receipt falsely showing state tobacco taxes had been paid. The other displayed the true purchase amount.
That article also stated another informant had told investigators that Khater printed receipts from an iPad, and that they falsely stated taxes had been paid.
This matter was investigated by the Federal Bureau of Investigation, the Internal Revenue Service, the New Hampshire Department of Revenue Administration and the Massachusetts Department of Revenue. The case is being prosecuted by Assistant U.S. Attorney John S. Davis, and Khater is scheduled to be sentenced on April 18.
Adam Urquhart may be contacted at 594-1206 or email@example.com.