Corporate President Sentenced to Prison for Multimillion Dollar California Excise Tax Scheme

SACRAMENTO, Calif. - Rahman Lakhani, of Naperville, Illinois, was sentenced today to four years in prison for a tobacco-related excise tax fraud scheme, U.S. Attorney Phillip A. Talbert announced.

U.S. District Judge Daniel J. Calabretta sentenced Lakhani and his two corporations, N. Ali Enterprises Inc. and 21^st Century Distribution Inc., for a total of 20 counts of mail and wire fraud. In addition to Lakhani's prison term, his companies were each sentenced to three years of probation and all defendants were ordered to pay over $5.9 million in restitution.

According to court documents, Lakhani and the corporate defendants used warehouses in Illinois, Nevada, and California, to move over $25 million worth of other tobacco products (OTP) across the United States and into California. OTP are tobacco products other than cigarettes, such as cigars and chewing tobacco.

As the defendants moved the OTP from state to state, they submitted false excise tax returns to different state regulators that were designed to hide the size and value of the shipments. Ultimately, the OTP was sold into California on false invoices with the misrepresentation that tax had been paid. In fact, Lakhani and the corporate defendants submitted or caused to be submitted false tax returns to the California Board of Equalization (BOE) and the California Department of Tax and Fee Administration (CDTFA). As a result of the fraud, Lakhani and the corporate defendants defrauded the State of California of over $5.9 million.

This fraud allowed Lakhani and the corporate defendants to earn additional profit and to undercut competitors who lawfully paid the excise tax. A large percentage of the proceeds of the California OTP excise tax are used to fund California's early childhood development program, First 5 California.

This case was the product of an investigation by the Bureau of Alcohol, Tobacco, Firearms and Explosives along with the former California State Board of Equalization, sections of which are now the California Department of Tax and Fee Administration. Assistant U.S. Attorneys Rosanne L. Rust and Michael D. Anderson prosecuted the case.