Korean national pleads guilty to cigarette tax evasion scheme

U.S. Immigration and Customs Enforcement said Un Hag Baeg, a South Korean national living in Southern California, defrauded the U.S. government out of $13 million in excise taxes on 143 million cigarettes.    U.S. Immigration and Customs Enforcement (ICE) said Un Hag Baeg of Marina del Rey, Calif., a South Korean national currently living in the United States, pleaded guilty last week to conspiring to defraud the United States government out of more than $13 million by evading federal excise taxes due on 143 million cigarettes.
   The cigarettes were sold within the United States, although they were reported to be destined for overseas markets via the ports of Los Angeles and Long Beach.  
   In the United States, cigarettes are subject to a federal excise tax of $50.33 per 1,000 cigarettes. While this tax is generally paid by the manufacturer, it may be avoided if the cigarettes are transferred to a bonded warehouse for exportation 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,” ICE said.
   Between 2012 and 2015, Baeg and others using false export documentation conspired to divert about 143 million export-only cigarettes from a bonded warehouse near the Port of Los Angeles. 
   According to ICE, the scheme resulted in the evasion of federal excise taxes totaling more than $7.2 million and California state excise taxes of nearly $6 million.
   U.S. District Judge S. James Otero has set Baeg’s sentencing for Jan. 29, 2018.