Charlotte, North Carolina - A North Carolina man was sentenced Thursday to 78 months in prison for conspiring to commit money laundering and filing a false tax return.
According to court documents and other information presented in court, Phil Howard, 55, arranged on at least 221 different occasions for cut-rag tobacco to be transported by trucks from Wilson, North Carolina, to an area on or near the Akwesasne Mohawk Nation Reservation (Akwesasne Reservation) as part of a conspiracy to smuggle the tobacco into Canada without paying Canadian federal excise duties and provincial taxes. The Akwesasne Reservation straddles the U.S.-Canadian border on both banks of the St. Lawrence River. Co-conspirators then smuggled the cut-rag tobacco over the St. Lawrence River and transported it to the Kahnawake Mohawk Nation Reservation in Quebec. Ultimately, the cut-rag tobacco was manufactured into contraband cigarettes.
In all, the conspiracy smuggled more than six million pounds of cut-rag tobacco into Canada, resulting in a tax loss to Canada exceeding $600,000,000. For his role, Howard received payment in the form of cash and cigarettes, as well as in the form of wires. In total, Howard laundered more than $2 million dollars in criminal proceeds. He further failed to report his criminal profits on his tax returns, including by filing false returns for tax years 2014 to 2018. This resulted in a tax loss to the United States of more than one million dollars.
In addition to his tobacco smuggling and tax fraud schemes, the court today applied an obstruction of justice enhancement at sentencing because Howard provided false testimony under oath to a federal grand jury that was investigating federal crop insurance fraud as part of a joint investigation by the U.S. Department of Agriculture’s Office of Inspector General (USDA-OIG) and the IRS.
In addition to the term of imprisonment, U.S. District Judge James C. Dever III ordered Howard to serve three years of supervised release and to pay approximately $1,062,192 in restitution to the United States.
Acting Deputy Assistant Attorney General Stuart M. Goldberg of the Justice Department’s Tax Division and Acting U.S. Attorney G. Norman Acker III for the Eastern District of North Carolina made the announcement.
USDA-OIG and IRS Criminal Investigation investigated the case, with assistance from Canadian Border Services Agency – Enforcement and Intelligence Operations Division, Intelligence Section; the Surete du Quebec Police; the Buffalo Homeland Security Investigations (HSI) Office and HSI Massena’s Border Enforcement Security Task Force; Bureau of Alcohol, Tobacco, Firearms, and Explosives, Charlotte Field Division; and the U.S. Attorneys’ Offices for the Northern District of New York and the Western District of New York.
Former Assistant U.S. Attorney Banumathi Rangarajan and Assistant U.S. Attorney Susan Menzer of the Eastern District of North Carolina, along with Trial Attorney Will Guappone of the Tax Division, prosecuted the case.