3 cigarette brokers face fraud charges over phony invoices
LOUISVILLE, Ky. (AP) -- A tobacco distributor closely watched by federal agents for a decade along with two relatives were charged in Kentucky with using phony invoices to avoid paying taxes on millions of dollars' worth of cigarettes sold in several states.
A federal grand jury in Louisville on Thursday charged 42-year-old Pedro "Peter" Bello of Miami, his sister, Caridad Bello of St. Louis, and her husband, Juan Hernandez of St. Louis, with conspiracy to commit wire fraud and money laundering in an effort to avoid paying $2 million to Kentucky in taxes on cigarettes.
Pedro Bello's attorney, Kent Westberry of Louisville, said the new indictment does not change the substance of the allegations against his client.
"Pete Bello still maintains his innocence on these charges," Westberry said.
Caridad Bello and Hernandez did not have attorneys listed in the court record.
Federal investigators have been tracking Pedro Bello since at least 2002, when prosecutors in Texas sought to secretly listen to cellphone conversations involving him. He was linked to several large-scale investigations and named in a civil lawsuit brought by the city of New York over untaxed cigarettes. A federal grand jury in Louisville initially charged him in October 2011, but re-indicted him Thursday with his sister and brother-in-law.
Authorities say he bought massive amounts of cigarettes in Kentucky but used invoices written by GT Northeast in Missouri, a company he owned in St. Louis, to avoid paying Kentucky sales taxes by making it appear that the sales originated in Missouri. He then sold the cigarettes around the country while pocketing bigger profits by avoiding the Kentucky tax.
The indictment says that Bello's Louisville-based company GT Northeast avoided paying on $12 million worth of cigarettes it sold.
Prosecutors want Bello to forfeit $2 million if he's convicted.
The federal government has cracked down in recent years on contraband cigarettes-- smokes sold by people and businesses through illegitimate channels to avoid paying taxes. The Department of Justice estimates that federal, state and local governments lose out on $5 billion annually in tax revenue from the cigarette schemes.
Pedro Bello's name has surfaced in several investigations at the heart of the ATF's crackdown. Federal court records from Kentucky, New York and Texas depict Bello as a man involved in moving millions of cigarettes around the country without paying taxes to various states.
Bello was a subject of the Texas investigation in 2002 in which federal prosecutors sought to secretly listen in on the cellphones of dozens of people suspected of trafficking in contraband cigarettes. He avoided indictment, but 15 others were charged, with 13 people pleading guilty or being convicted. Prison sentences ranged from a year to six years behind bars.
The current case against Bello is also tied to an ongoing civil forfeiture case in Kentucky against Chavez Inc., which sold cigarettes online before federal investigators shut it down in 2009.
Bello is mentioned frequently in a search warrant for Chavez Inc. The company is suspected of selling $132 million in cigarettes online while avoiding paying a variety of taxes to states, including $2.3 million in excise taxes to Kentucky.
Chavez Inc., and its owners, Israel Chavez of Louisville and his ex-wife, Pam Chavez of Stockton, Calif., have not been charged criminally.
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