LOS ANGELES
Un Hag Baeg, 58, of Marina del Rey, a Korean living in the U.S., plead guilty Tuesday to conspiring to defraud the U.S. by evading federal excise taxes due on 143 million cigarettes sold domestically, according to officials.
The co-conspirators claimed the cigarettes were destined for cargo vessels sailing out of the ports of Los Angeles and Long Beach, officials said.
In the United States, cigarettes are subject to a federal excise tax of $50.33 per one thousand cigarettes.
This tax is generally paid by the manufacturer but may be avoided if the cigarettes are properly transferred to a bonded warehouse in order to be exported or consumed outside of the United States.
Untaxed cigarettes sold for this purpose are known as “export-only” cigarettes. When export-only cigarettes are diverted from their proper destination, and instead sold in the United States, federal and state taxing authorities suffer lost excise taxes.
According to court documents, between 2012 and 2015, Baeg and others conspired to divert approximately 143 million export-only cigarettes from an export warehouse near the Port of Los Angeles.
Baeg purchased the cigarettes under the pretext that the cigarettes would be provided to various ships sailing out of the United States from the ports, according to authorities.
In fact, the cigarettes were sold in the United States resulting in millions of dollars in lost federal and state excise taxes. Baeg and his co-conspirators subsequently hid their fraud by preparing false paperwork indicating that the cigarettes had been delivered to the various ships.
In order to give this paperwork the appearance of legitimacy, the conspirators would stamp the paperwork with false rubber stamps bearing the names of the subject cargo vessels.
The conspiracy resulted in the evasion of federal excise taxes totaling $7.2 million and California state excise taxes totaling $5.9 million.
U.S. District Judge S. James Otero set Baeg’s sentencing for Jan.29.