redacted atif indictment

8/3/2019 Redacted Atif Indictment

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IN THEUNITED STATES DISTRICT COURTFOR THEWESTERN DISTRICT OF VIRGINIA

HARRISONBURG DIVISIONAUGUST 2011 SESSION

rCl.!Rl('I OFPIOIi! U,S, Ollli', COURAT H A A I ' I I I I O N I I U ~ G , VAflJUlOAUG 032011

" .fULI.Ot C ' D ~ ~ : . _\ BY: ' VI \. DEPUTY CLERK

UNITED STATES OF AMERICA Criminal No.:2> : \\C-(ZO00ci3v.

'CHENGZENGa/k/a "Alex'MOHAMMAD BUTT

MUSHTAQ AHMADa/k/a"Tony'

SEALEDTitle 18 U.S.C. 371Title 18 U.S.C. 2342Title 18 U.S.C. 1956

a/k/a'Mushtaq Ahmad Kharl'a/k/a"Ahmad Mushtaq'

The Grand Jury charges that:INDICTMENT

COUNT!(18 U.S.C. 371)(Conspiracy-Contraband Cigarettes)1. From in or about April 2009, and continuing up to and including the date of this

indictment, in the Western District of Virginia and elsewhere, the defendants,

CHENG ZENG, MOHAMMAD BUTT,and MUSHTAQ AHMAD, knowingly and willfully conspired

and agreed together and with each other (and with other persons known and unknown tothe Grand Jury) to knowingly ship, transport, receive, possess, sell, distribute and

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purchase contraband cigarettes, as that term is defmed in Title 18, United States Code,Section 2341, to wit: a quantity ofmore than 10,000 cigarettes which bore no evidence ofthe payment of applicable State cigarette taxes, in violation of 18 U.S.C. 2342(a).

INTRODUCTION2. Title 18, United States Code, Section 2342(1) defines contraband cigarette trafficking and

states, "It shall be unlawful for any person knowingly to ship, transport, receive, possess,sell, distribute, or purchase contraband cigarettes."

3. Title 18, United States Code, Section 2341(2) defines "contraband cigarettes," as "aquantity in excess of 10,000 cigarettes, which bear no evidence of the payment ofapplicable State or local cigarette taxes in the State or locality where the cigarettes arefound, if the State or local government requires a stamp, impression, or other indicationto be placed on packages or other containers of cigarettes to evidence payment ofcigarette taxes, and which are in the possession of any person other than:"a. A person holding a permit issued pursuant to chapter 52 of the Internal Revenue

Code of 1986 as a manufacturer of tobacco products or as an export warehouseproprietor, or a person operating a customs bonded warehouse pursuant to section311 or 555 of the Tariff Act of 1930 (19 U.S.C. 1311 or 1555) or an agent of suchperson;

b. A common or contract carrier transporting the cigarettes involved under a properbill of lading or freight bill which states the quantity, source, and destination ofsuch cigarettes;

c. A person-. 1. who is licensed or otherwise authorized by the State where the cigarettes

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are found to account for and pay cigarette taxes imposed by such State;and

11. who has complied with the accounting and payment requirements relatingto such license or authorization with respect to the cigarettes involved; or

d. An officer, employee, or other agent of he United States or a State, or anydepartment, agency, or instrumentality of the United States or a State (includingany political subdivision of a State) having possession of such cigarettes inconnection with the performance of official duties.

4. Virginia Code 58.1-1001 states that:A. Except as provided in subsection B, in addition to all other taxes now imposed bylaw, every person within this Commonwealth who sells, stores or receives cigarettesmade of tobacco or any substitute thereof, for the purpose of distribution to any personwithin this Commonwealth, shall pay to this Commonwealth an excise tax of one andone-quarter mills on each such cigarette sold, stored or received before August 1, 2004;an excise tax of one cent on each such cigarette sold, stored or received on and afterAugust 1, 2004, through midnight on June 30, 2005; and an excise tax of 1.5 cents oneach such cigarette sold, stored or received on and after July 1, 2005.B. In addition to all other taxes now imposed by law, every person within theCommonwealth who sells, stores, or receives roll-your-own tobacco, for the purpose ofdistribution within the Commonwealth, shall pay to the Commonwealth a cigarette excisetax at the rate of 10% of the manufacturer's sales price of such roll-your-own tobacco.

5. Virginia Code 58.1-1003 states that:A. Except as otherwise specifically provided pursuant to 58.1-1003.2, the taxes

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imposed by this chapter shall be paid by affixing stamps equaling the amount of the tax inthe manner set forth. The stamps shall be affixed to each individual package, bag, box orcan in such a manner that their removal will require continued application ofwater orsteam. Every stamping agent in the Commonwealth shall affix to any unstampedcigarettes the requisite denominations and amount of stamp or stamps that represent theproper tax levied by~ t h i s chapter prior to shipping to other wholesale dealers or retailoutlets.

6. A "master case" of cigarettes, also known as a "case" of cigarettes, contains 60 cartons ofcigarettes.

7. A "half-case" of cigarettes contains 30 cartons of cigarettes.8. A standard "carton" of cigarettes contains 10 packs of cigarettes.9. A standard "pack" of cigarettes contains 20 cigarettes.10. "Taxed" or "stamped" cigarettes means a State or local tax stamp has been affixed to the

cigarettes.11. "Untaxed" or "unstamped" cigarettes means a State or local tax stamp has not been

affixed to the cigarettes.12. The Commonwealth ofVirginia has experienced an influx of organizations and

individuals who buy large volumes of cigarettes to transport to other states. Virginia is asource state for low-cost, low-tax cigarettes. States that impose high taxes are oftendestination states, such as New York.

13. In 2009 and 2010, the Commonwealth ofVirginia levied a cigarette tax of $0.30 per packor $3.00 per carton of cigarettes.

14. In 2009 and 2010, the State ofNew York levied a cigarette tax of$2.75 per pack orUSAO#:2011R00380

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$27.50 per carton of cigarettes.15. In 2009 and 2010, New York City levied a cigarette tax of$1.50 per pack or $15.00 per

carton of cigarettes (plus the state tax levy of $2.75 per pack-equaling a combined taxlevy of $4.25 per pack) or $42.50 total per carton of cigarettes. This tax is included in theretail price indicated below.

16. Effective April 1, 2009, the Children's Health Insurance Program Reauthorization Act of2009 (CHIPRA) increased the federal cigarette tax to approximately $10.06 per carton.

17. There are many different kinds and quality levels of cigarettes. Marlboro cigarettes, forexample are a Tier One, meaning highest quality level, cigarette that in 2010 retailed inVirginia for approximately $36.00 per carton. The wholesale price in 2010 in Virginiafor this same carton of cigarettes would be approximately $32.08.

18. In 2009, the retail price for a carton ofMarlboro cigarettes in New York wasapproximately $71.70. In 2010, the retail price for a carton ofMarlboro cigarettes in NewYork was approximately $92.00.

19. In 2009, the retail price for a carton ofMarlboro cigarettes in New York City wasapproximately $88.00. In 2010, the retail price for a carton ofMarlboro cigarettes inNew York City was approximately $110.00.

20. The difference in price of a carton of cigarettes in Virginia as compared to New York andother high cigarette tax states is such that individuals engaged in the illegal trafficking ofcigarettes can make a substantial amount ofmoney by buying cigarettes in Virginia,paying the Virginia cigarette tax, and selling them in other states that levy a greater tax.Individuals engaged in the trafficking of contraband cigarettes can make even moremoney by buying untaxed cigarettes and selling them in states that levy a greater cigarette

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tax. The procurement of cigarettes from low tax states or untaxed cigarettes for sale inhigh tax states without paying the cigarette tax in the high tax state is the essence ofcontraband cigarette trafficking.

21. To conceal their contraband cigarette trafficking, participants sometimes file false ormisleading reports with state agencies, and/or place counterfeit state tax stamps on thecigarette packs they sell.

22. The illegal proceeds generated by the sale of contraband cigarettes in high tax states canalso be used to make additional cigarette purchase from low or no tax sources. In thisway the contraband cigarette trafficking enterprise can continue.

23. The Bureau ofAlcohol, Tobacco, and Firearms is the principal federal agencyresponsible for investigating the transportation and possession of contraband cigarettes.

MANNER AND MEANS OF THE CONSPIRACY24. It was part of the conspiracy for the defendants to acquire untaxed cigarettes in the

Western Judicial District ofVirginia and to transport them or have them transported fordistribution in New York City and other locations known and unknown to the GrandJury.

25. It was further part of the conspiracy that as ofMarch 7, 2011, during the course of theconspiracy, the defendants have purchased from undercover law enforcement officersapproximately 103,272 cartons of cigarettes, ofwhich approximately 101,569 cartons ofcigarettes were untaxed. The defendants have paid undercover law enforcement officersapproximately $2,625,379, for all the cigarettes, and $2,621,099 for the untaxedcigarettes. All of the cartons of cigarettes the defendants purchased had a 2010 retailvalue of approximately $3,717,792 in Virginia, or $9,501,024 in New York, or

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$11,359,920 in New York City.26. It was a further part of the conspiracy that in order to facilitate and conceal the illegal

conduct, the defendants used various businesses and business names.27. It was a further part of the conspiracy that the defendants used various bank accounts to

conceal proceeds from the illegal conduct.28. It was a further part of the conspiracy that the defendants used proceeds from the illegal

conduct to promote their business in contraband cigarettes.29. It was a further part of the conspiracy that during the course of the conspiracy, the

defendants deprived the Commonwealth ofVirginia ofmore than $304,707 in cigarettetaxes. Contraband cigarettes that were transported and sold in other states resulted in theloss of additional tax revenues to those states.

BACKGROUND INFORMATION30. (hereafter

a. Has listed his address as

b. Has listed his occupation as owner of a tobacco shop.31. (hereafter

a. Previously used the nameb. Has listed her address as

c. Has listed her occupation as homemaker and unemployed.

32. . CHENG ZENG (hereafter ZENG):a. Goes by the name "Alex'.

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b. Has listed his address as 247 Gordon Drive, Hedgesville, West Virginia.33. MOHAMMAD BUTT (hereafter BUTT):

a. Has listed his address asb. He listed his occupation as self employed.c. He is listed as the Director ofNail a Inc.

34. MUSHTAQ AHMAD (hereafter AHMAD):a. Also goes by the name"fony:'b. Has listed his address as

35. (hereaftera. Also goes by the nameb. Has listed his address as

36. American Market Inc. (hereafter American Market):a. Has used the name The Smoke Shop to transact business.b. Has listed its EINITIN number as xxxxx4198.c. Has listed its address as 201 Centre Drive, Suite 105, Stephens City, Virginia

22655.d. Has listed its type ofbusiness as a grocery store and as a tobacco retail store.e. Has listed its owner as

37. Bank account number xxxxxx5806 with First Bank is listed in the name ofand R.S (an individual known to the Grand Jury).

( and R.S. have signing authority regarding this account.38. Bank account number xxxxxx9601 with First Bank is listed in the name of American

Market Inc., Smoke Shop. has signing authority regarding this account.USAO#:2011R00380 8


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39. Bank account number xxxxxx2601 with First Bank is listed in the name of AmericanMarket Inc. signing authority regarding this account.

40. Bank account number xxxxxx0701 with First Bank is listed in the name of StrasburgTobacco, Inc. has signing authority regarding this account.

41. Bank account number xxxxxx3501 with First Bank is listed in the name of A&MTobacco T/A The Smoke Shop. has signing authority regarding this account.

42. Bank account number xxxxxx31 06 with First Bank is listed in the name ofMOHAMMAD BUTT. BUTT has signing authority regarding this account.

43. First Bank Safety deposit box was rented by on July 18,2007. This boxis located at First Bank, Sherando Financial Center, 695 Fairfax Pike, Stephens City,Virginia.

44. First Bank Safety deposit box was rented by on July 18,2007. This boxis located at First Bank, Sherando Financial Center, 695 Fairfax Pike, Stephens City,Virginia.

OVERT ACTSIn furtherance ofthe conspiracy and to affect the objects of the conspiracy, the following

overt acts, among others, were committed in the Western District of Virginia:45. On April 3, 2009, an undercover lawenforcement officer (hereafter UC) traveled to

Carter's Store in Middletown, Virginia, and spoke with a Middle-Eastern male standingbehind the counter that appeared to be a store clerk. A UC told the clerk that he was asmall wholesale cigarette seller and gave the clerk a fictitious price list and business card.The clerk told the UC that the owner had a second store in Stephens City, Virginia(American Market/The Smoke Shop) and that he would have the owner call the UC later.

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Later on the same day, the UC received a telephone call from who identifiedhimself F said he was the owner ofCarter's Store and was interestedin obtaining cigarettes from the UC.

46. On April 6, 2009, a UC traveled to Carter's Store. Upon arriving, identifiedhimsel f to the UC as " asked the UC about getting cigarettes.asked the UC what brands the UC had for sale and what the prices were. pulled outthe fictitious price lis tthat the UC had dropped off previously and asked the UC if theprices listed were current and reflected the recent tax increase (Effective Apr 1, 2009,CHIPRA increased the federal excise tax). The UC told that they did. The UCexplained that he was a wholesaler supplying extra cigarettes to stores in the area.told the UC that they would need approximately 1000-1500 cartons of cigarettes eachweek. Later the same day, telephoned the UC and ordered 220 cartons of taxedcigarettes.

47. On April 9, 2009, a UC delivered 220 cartons of taxed cigarettes to Carter's Store(located in Middletown, Virginia). purchased and took delivery of these cigarettesand told the UC to bring the cigarettes into the store. paid $6,080 ($3,080 in cash,and $3,000 by check, number 1163, drawn on First.Bank account number xxxxxx2601 inthe name ofAmerican Market) for the cigarettes. then placed an order with the UCfor 40 cartons of cigarettes.

48. On April 14, 2009, a UC arrived at Carter's Store and spoke with a Middle-Eastem malebehind the counter, who identified himselfas s brother. This individual received 39cartons of taxed cigarettes. and the UC then spoke via telephone. After concludingthe telephone call, the individual behind the counter paid the UC $682.50 by check

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(check number 1547, drawn on First Bank account number xxx5401 in the name ofShaimaan Inc. T/A The Smoke Shop).

49. On April 18, 2009, contacted a UC by telephone. told the UC that he wanted300 cartons ofMarlboro Light cigarettes for delivery on April 20. told the UC thathe did not want tax stamps on the cigarettes. The UC asked ifhe said that he didnot want stamps on the cigarettes. responded that he did not want stampedcigarettes. also stated he would need an additional 400 cartons of untaxedcigarettes later in the week.

50. On April 19, 2009, a UC and spoke by telephone. The UC told that did nothave complete order and that he only had 180 cartons ofuntaxed cigarettes.

told the UC that was okay, and asked if the UC could deliver the 180 cartons onApril 20. the UC agreed to make the delivery and told he would have theremaining 120 cartons by April 22.

51. On April 20, 2009, at approximately 11:40 a.m., contacted the UC by telephoneand told the UC that he was at the store and needed the cigarettes delivered by 2:00 p.m.

52. On April 20, 2009, at approximately 1 25 p.m. a UC arrived at Carter's Store with 180cartons of untaxed cigarettes. told the UC that he wanted the cigarettes put into acar in the parking lot outside the store. and the UC left the store and wereaccompanied by R.S. to a car in the parking lot. and the UC then loaded 180cartons of untaxed cigarettes into the car. R.S. then drove away in the car, heading northon Route 11. paid the UC $4,860 in cash for the cigarettes. The UC asked ifhe still wanted the 400 cartons of untaxed cigarettes as he had previously requested.

said he needed to call his customer, but most likelyhe would want the cigarettes.USAO#:201IR00380

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also said he would have to pay the DC the day after the DC delivered the cigarettes,explaining that his customer comes at night and would not have the money to payfor the cigarettes until after his customer picked up the cigarettes.

53. On April 21, 2009, contacted a DC by telephone and requested 60 cartons ofuntaxed Marlboro Light cigarettes in addition to the 120 cartons ofuntaxed MarlboroLights he had previously ordered.

54. On April 23, 2009, a DC arrived at Carter's Store with 240 cartons of taxed and 180cartons of untaxed cigarettes. BDTT was seated at a table at the front of the store.purchased and took possession of all the cigarettes. told the DC that he wanted allthe cigarettes placed in a white Toyota SDV. paid the DC $12,195 in cash for allthe cigarettes. requested that additional cigarettes be delivered when the DCdelivered the 300 cartons of untaxed Marlboro Light cigarettes.

55. On May 1, 2009, a DC arrived at Carters Store with 250 cartons of taxed and 290 cartonsofuntaxed cigarettes. was inside the store, while BDTT was out front of the store.

told the DC that he wanted the cigarettes put into a car outside the store. andthe DC then proceeded to load all the cigarettes into a light colored compact car. Whenthe DC offered to deliver the cigarettes, explained that he had a driver coming.

paid the DC $3,600 for the taxed cigarettes. reiterated that his customerwould be down later that night and would call the DC the following day when hehad the money for the untaxed cigarettes. also placed an additional order forcigarettes.

56. On May 3, 2009, a DC traveled to Carters Store where he spoke with R.S., who told theDC that he DC would have to go to their other store in Stephens City, the American

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Market, to meet up with The UC traveled to the American Market, where he metwith asked the UC who he was. The UC explained that he wasthere to meet to pick up money. asked the UC how much money, towhich he replied $11,340. then addressed the UC as"the cigarette guy' and toldhim that was on his way. arrived and paid the UC $11,340.

57. On May 5, 2009, a UC arrived at the American Market with 598 cartons of taxedcigarettes and spoke with who instructed the UC to put some of the cigarettes in

Toyota Land Cruiser and the remainder in the store. the UC andcarried the remainder, approximately one-halfof the cigarettes, into the AmericanMarket. paid the UC $6,770 for the cigarettes. Approximately 30 minutes after theUC left the American Market, called the UC and asked him to return to the store,which he did. Once the UC was back at the American Market, paid the UC anadditional $5,000 and placed an additional order for 440 cartons of taxed and 230 cartonsof untaxed cigarettes.

58. On May 7, 2009, a UC delivered 285 cartons of taxed and 110 cartons ofuntaxedcigarettes to at Carters Store. and the UC loaded the cigarettes intoToyota SUV. The UC told he did not have 120 cartons of order.asked the UC ifhe stamped cigarettes for Maryland. The UC explained that he did not,but that he might be able to supply with counterfeit Maryland tax stamps.asked the UC to see about getting the counterfeit Maryland tax stamps, saying that if theUC could put the stamps on Newport cigarettes, he would be able to make large orders.

then asked what the price would be for the counterfeit Maryland tax stamps. TheUC replied that the price would be the cost of the stamps plus $0.10.

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59. On May 11,2009, at Carter's Store purchased and received 150 cartons of untaxedcigarettes from a UC. paid the UC $5,865 for taxed cigarettes delivered on May 7,2009. told the UC that he would pay the UC the following day for the cigarettes hehad just received.

60. On May 12, 2009, at the American Market paid a UC $4,280 for cigarettes theUC had previously delivered to The UC traveled to Carter's Store, whereordered 60 cartons oftaxed Virginia Slim cigarettes.

61. On November 3, 2009, spoke with via telephone and placed an order for cigarettes.A DC told that he only had untaxed cigarettes. told the UC that was fine.

62. On November 4,2009, at Carter's Store purchased and received 600 cartons ofuntaxed cigarettes from a UC that had previously ordered. paid the UC$18,480 in cash.

63. . On November 9, 2009, at Carter's Store purchased and received 540 cartons ofuntaxed cigarettes from the UC that had previously ordered. agreed to paythe UC the following day.

64. On November 10, 2009, near a restaurant on Route 11 in Strasburg, Virginia paidthe UC $16,440 for untaxed cigarettes.

65. On November 24, 2009, at Carter's Store purchased and received 720 cartons ofuntaxed cigarettes from a UC.

66. On November 25,2009, at Carter's Store purchased and received 240 cartons ofuntaxed cigarettes from a UC. paid the DC $17,195 in cash for untaxed cigaretteshe purchased on November 24.

67. On December 1,2009, at Carter's Store purchased and received 300 cartons ofUSAO#:201IR00380

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untaxed cigarettes from a UC. paid the UC $6,240 for cigarettes he received onNovember 25. The UC asked when he was going to pay his debt of $2,005 fromthe delivery of untaxed cigarettes on November 25. said it was his fault becausethe money had come from his customer and he did not count the money before giving itto the UC. also said he was going to bring a new customer with him to thewarehouse (where the UC stored cigarettes) to introduce the customer to the UC.

68. On December 3, 2009, arrived at the warehouse in a green Toyota4Runner beingdriven by AHMAD, who introduced as"Tony:' purchased and received 600cartons of untaxed cigarettes. paid the UC $8,800 in cash. stated that"rony'was interested in purchasing untaxed Newport cigarettes from the UC and would need tobuy the cigarettes on consignment, meaning he would pay the UC after he sold thecigarettes.

69. On December 17,2009, at the warehouse BUTT received 1320 cartons of untaxedcigarettes. During the delivery, BUTT and a UC discussed whether BUTT wastransporting the cigarettes to New York because a snow shower was predicted. BUTTtold the UC that he would be back by the time the snow started falling because he wasgoing to New York that evening and would be returning the following morning. BUTTtold the UC that he did not have the money for the cigarettes, but that the UC shouldcome to the American Market the next afternoon to get paid.

70. On December 21,2009, outside ofCarte s Store BUTT paid a UC $37,160 for untaxedcigarettes that BUTT had purchased on December 17, 2009. During the transaction,BUTT told the UC that his customers were in New York City and that BUTT would needfirst to obtain the cigarettes from the UC, transport the cigarettes to New York, get paid

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and then return immediately and pay the UC for the cigarettes.71. On December 22,2009, at the warehouse BUTT and another individual purchased and

received 6750 cartons of untaxed cigarettes from a UC. BUTT agreed to pay for thecigarettes the following Thursday.

72. On December 28,2009, BUTT and another individual met a UC at a gas station nearMiddletown, Virginia. BUTT paid the UC $180,300. During the transaction, BUTT toldthe UC that he, BUTT, had previously driven the cigarettes to New York for anotherindividuaL BUTT said he was paid $200 per trip and when he asked for a raise he was letgo. That was when he started working for

73. On December 29,2009, at the warehouse BUTT and another individual purchased andreceived 3600 cartons of untaxed cigarettes from a UC. They paid the UC $101,741 incash.

74. On December 30,2009, at the warehouse BUTT and another individual purchased andreceived 2880 cartons of untaxed cigarettes from a UC. They paid the UC $32,418 incash. During the transaction, BUTT told the UC that they house the cigarettes until it istime to take them to New York and that they only take about 46 cases of untaxedcigarettes at a time in order to reduce the risk of getting caught. BUTT also stated that hehad purchased a conversion van and that they would no longer be using a rental van.

75. On January 5, 2010, at the warehouse BUTT and another individual purchased andreceived 2280 cartons for untaxed cigarettes from a UC. They paid the UC $82,481 incash. BUTT and the other individual transported the untaxed cigarettes in a Chevroletconversion van. During the transaction BUTT stated that he andthe other individualwould be able to meet again on January 6, 2010 at 10:30 a.m. because they were traveling

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up to New York and heading straight back.76. On March 2,2010, at the warehouse and who was introduced as

purchased and received 840 cartons for untaxed cigarettes. paid a UC$21,840 in cash.

77. On March 4,2010, at the warehouse and purchased and received1800 cartons for untaxed cigarettes. paid a UC $48,360 in cash for untaxedcigarettes.

78. On March 9, 2010, at the warehouse and purchased and received780 cartons of untaxed cigarettes. paid a UC $10,000 in cash for untaxedcigarettes. A few hours later, met the UC in Stephens City, Virginia and paid thebalance owed for the untaxed cigarettes, $10,280 in cash.

79. On March 23,2010, at the warehouse and purchased and received5100 cartons of untaxed cigarettes. paid a UC $144,020 in cash for untaxedcigarettes. During the transaction, told the UC that he had a new customer that waspicking up cigarettes and that did not have to deliver them. and the UC alsodiscussed a $19,000 debt owed by BUTT. told the UC that BUTT would becoming to the warehouse soon and that BUTT would not be working with butwould be working by himself.

80. On March 26, 2010, and met a UC at a restaurant in Stephens City,Virginia. told the UC that he and had some bad luck, explaining thathe and had been robbed of their cigarettes in New York. also told theUC that he lost $150,000 because he had notreceived any money in advance for thecigarettes that were seized. then paid the UC $9,650 towards the debt he owed the

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UC for untaxed cigarettes.81. On April 13, 2010, at the warehouse purchased and received 1380 cartons of

untaxed cigarettes from a UC. paid the UC $3,000 in cash for untaxed cigarettes.82. On April 14, 2010, at the warehouse purchased and received 660 cartons of

untaxed cigarettes from a UC. paid UC1 $33,320 for the untaxed cigarettes andtowards his debt.

83. On the same day, a few hours later at a grocery store parking lot in Stephens City,purchased and received 180 cartons of untaxed cigarettes from a UC. also paid theUC $20,000 in cash towards his untaxed cigarette debt.

84. On April 21, 2010, at the warehouse purchased and received 2100 cartons ofuntaxed cigarettes from a UC. paid the UC $23,000 in cash for untaxed cigarettes.

85. On the same day, a few hours later, returned to the warehouse and paid a UC$35,000 in cash and purchased an additional 480 cartons of untaxed cigarettes.

86. On April 27, 2010, at the warehouse purchased and received 960 cartons ofuntaxed cigarettes from a UC. paid the UC $17,140 in cash for the untaxedcigarettes. also asked the UC if he could receive a $1 commission per carton forcigarettes sold to a new customer, described by as a Chinese man that wouldintroduce to the UC. told the UC that this person was willing to pay $1 percarton in exchange for introducing him to the UC.

87. On May 11, 2010, at the warehouse and ZENG, identified by as"Alex;'purchased and received 1200 cartons ofuntaxed cigarettes from a UC (1140 by 60by ZENG). The cigarettes were loaded into a red minivan and a blue Honda Accord.

paid the UC $28,000.USAO#:201IR00380

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88. On May 12,2010, at the warehouse purchased and received 1920 cartons ofuntaxed cigarettes from a DC (1320 for 600 for"fony,). paid the DC $51,560in cash ($35,960 for purchase; $15,600 for"fony'purchase) for untaxed cigarettes.

told the DC that he wanted to bring a new customer,"fony;'(introduced by tothe DC on December 3, 2009 and identified as ) to the warehouse but"fony'hadfallen asleep, and so was buying untaxed cigarettes on behalfof'fony:'

89. On May 18, 2010, at the warehouse purchased and received 2400 cartons ofuntaxed cigarettes from the DC (1320 for 1080 for''fonY,). indicated thatsome of the cigarettes were being purchased on behalf of'fony;'( paid aDC $64,320 ($34,320 for purchase; $30,000 for''fong'purchase) in cash foruntaxed cigarettes.

90. On May 18, 2010, at the warehouse ZENG purchased and received 720 cartons ofuntaxed cigarettes from a DC. He paid the DC $15,000. During the transaction, ZENGstated he was not storing his cigarettes at store in Stephens City, but was going torent a house and store the cigarettes there. When the DC offered to deliver a largequantity of cigarettes to ZENG in New York, which would be cheaper than ZENGrenting a house for storage, ZENG stated that that was not the way they do it in NewYork. ZEN G said they are very careful and use small cars to transport cigarettes and thatwas the way he was going to do it at first and be safe.

91. On May 25, 2010, at the warehouse and ZENG purchased and received 2460cartons (1380 to 1080 to ZENG) of untaxed cigarettes from a DC. andZENG paid the DC $90,870 ($60,430 from $30,440 from ZENG) in cash for allthe untaxed cigarettes. During the transaction, ZENG asked if the DC would deliver a

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load of untaxed cigarettes to the New York City area.92. Later that day at approximately approx 3:17 p.m., returned to the warehouse and

purchased 1020 cartons ofuntaxed cigarettes from a UC.93. On June 1,2010, at the warehouse and ZENG purchased and received 2520 cartons

(1080 to 1440 to ZENG) ofuntaxed cigarettes from a UC. and ZENG paidthe UC $56,640 ($26,640 from $30,000 from ZENG) in cash for the untaxedcigarettes.

94. On June 7, 2010, at approximately 8:30 a.m. at the warehouse ZENG purchased andreceived 420 cartons of untaxed cigarettes from a Uc . ZENG paid the UC $19,880 incash.

95. On June 7, 2010, at approximately 1:00 p.m, at the warehouse purchased andreceived 1680 cartons of untaxed cigarettes from a UC. paid the UC $34,960 incash for untaxed cigarettes.

96. On the same date, at approximately 2:00 p.m., and ZENG purchased and received1920 cartons (840 to 1080 to ZENG) of untaxed cigarettes from a Uc. andZENGpaid the UC $51,400 ($29,060 from $22,340 from ZENG) in cash foruntaxed cigarettes.

97. On June 16,2010, at the warehouse and ZENG purchased and received 4140cartons (2400 to 1740 to ZENG) of untaxed cigarettes from a UC. andZENG paid the UC $96,140 ($48,980 from $47,160 from ZENG) in cash foruntaxed cigarettes.

98. On the same date, a few hours later at approximately approximately 1 56 p.m.,returned to the warehouse and purchased and received 2400 cartons ofuntaxed cigarettes

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from a Uc. paid the UC $71,140 in cash for untaxed cigarettes.99. On June 22, 2010, at the warehouse and ZENG purchased and received 6900

cartons (5460 to 1440 to ZENG) of untaxed cigarettes from a UC. andZENG paid the UC $161,000 ($116,760 from $44,240 from ZENG) in cash foruntaxed cigarettes. During the transaction, told the UC that the cigarettes he waspurchasing were going to be divided among three ofhis customers.

100. On July 9, 2010, at a storage facility located near Woodstock, Virginia ZENG purchasedand received 720 cartons ofuntaxed cigarettes from a UC. ZENG paid the UC $19,440in cash. During the transaction ZENG stated he was getting his orders for untaxedcigarettes from customers in New York. ZENG said he had rented an apartment inStephens City, where his customers came to pick up cigarettes.

101. On July 13,2010, at a storage facility in Woodstock, Virginia purchased andreceived 1500 cartons of untaxed cigarettes from a UC. the paid UC $39,000.00 incash for untaxed cigarettes.

102. On July 14, 2010, at a residence located on Lynn Drive, Stephens City, Virginia ZENGpurchased and received 960 cartons of untaxed cigarettes from a UC. ZENG paid the UC$20,000 in cash. The residence was sparsely furnished, including an air-mattress and amoney-counting machine. ZENG stated he had rented the property because it was safer.

103. On Augnst 10,2010, at the warehouse purchased and received 1560 cartons ofuntaxed cigarettes from a UC. paid the UC $38,700 in cash for untaxed cigarettes.

104. On Augnst 17,2010, at a storage facility near Woodstock, VirginiaATIF and ZENGpurchased and received 2640 cartons (1200 to 1440 to ZENG) of untaxedcigarettes from a UC. and ZENG paid the UC $69,380 ($30,000 from

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$39,380 from ZENG) in cash for untaxed cigarettes.105. On August 26, 2010, at a storage facility located near Woodstock, Virginia and

ZENG purchased and received 2640 cartons (1200 to 1440 to ZENG) of untaxedcigarettes from a UC. and ZENG paid the UC $63,690 ($29,810 from$33,880 from ZENG) in cash for untaxed cigarettes.

106. On August 31, 2010, at the warehouse ZENG purchased and received 2460 cartons ofuntaxed cigarettes from a UC. ZENG paid a UC $68,900 in cash for untaxed cigarettes.ZENG told a UC that he was purchasing cigarettes for specifically, that 1020cartons of untaxed cigarettes were for and $25,020 of the money given to a UC wasfrom

107. On September 27,2010, at the warehouse and ZENG purchased and received 3540cartons (2100 to 1440 to ZENG) of untaxed cigarettes from a UC. andZENG paid the UC $97,410 ($62,410 from $35,000 from ZENG) in cash foruntaxed cigarettes.

108. On October 13, 2010, at the warehouse ZENG purchased and received 1980 cartons of"untaxed cigarettes from a UC. ZENG paid a UC $54,360 in cash for untaxed cigarettes.

109. On November 3, 2010, at the warehouse ZENG purchased and received 2160 cartons ofuntaxed cigarettes from a UC. ZENG paid a UC $58,300 in cash for untaxed cigarettes.

110. On November 16,2010, at the warehouse ZENG purchased and received 1200 cartons ofuntaxed cigarettes from a UC. ZENG paid the UC $38,000 in cash for untaxed cigarettes.During the transaction ZENG said that his customers had provided the money to ZENGso that he could purchase the cigarettes.

111. On December 7, 2010, at the warehouse ZENG purchased and received 1200 cartons ofUSAO#:20IlR00380 22


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untaxed cigarettes from a UC. ZENG paid the UC $33,300 in cash for untaxed cigarettes.112. On December 17,2010, at the warehouse ZENG purchased and received 1200 cartons of

untaxed cigarettes from a UC. ZENG paid the UC $33,000 in cash for untaxed cigarettes.During the transaction, ZENG said his customer was on his way to pick up the cigarettesZENG had just purchased.

113. On January 19,2011, at the warehouse and ZENG purchased and received 3750cartons (1950 to 1800 to ZENG) ofuntaxed cigarettes from a UC. andZENG paid $102,500 ($53,300 from $49,200 from ZENG) in cash for untaxedcigarettes. During the transaction ZENG indicated he did not have any employment otherthan trafficking untaxed cigarettes.

114. From January 2009 through July 2009, American Market reported $195,967 in grossVirginia sales.

115. From August 2009 until January 2011, American Market reported $0 in gross Virginiasales.

116. During 2009, and deposited or caused to be deposited $294,720 into oneor more of the banks accounts listed above.

117. For tax year 2009, and filed a joint federal tax return and reported grossreceipts income of $32,482 and a net profit of $16,576.

118. From January 2010 through January 2011, American Market, Inc. reported $0 in grossVirginia sales.

119. From January 2010 through January 2011, and deposited or caused to bedeposited $26,283 into one of the bank accounts listed above.

120. All in violation ofTitle 18, United States Code, Section371.USAO#:201IR00380

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COUNTS 2(18 U.S.C. 1956(h))(Conspiracy to Commit Money Laundering)

1. The allegations contained in Count Iare hereby realleged and incorporated by referenceas though set forth in full.

2. From in or about April 2009 and continuing up to and including the date of thisindictment, in the Western District ofVirginia and elsewhere, the defendants,

CHENG ZENG, MOHAMMAD BUTT,and MUSHTAQ AHMAD, did knowingly combine, conspire,

and agree with each other and with other persons known and unknown to the Grand Juryto commit offenses against the United States in violation ofTitle 18, United States Code,Section 1956, to wit:a. to knowingly conduct and attempt to conduct a financial transaction affecting

interstate and foreign commerce, which involved the proceeds ofa specifiedunlawful activity, that is trafficking in contraband cigarettes, with the intent topromote the carrying on of specified unlawful activity, that is trafficking incontraband cigarettes, and that while conducting and attempting to conduct suchfinancial transaction knew that the property involved in the financial transactionrepresented the proceeds of some form of unlawful activity in violation ofTitle18, United States Code, Section 1956(a)(I)(A)(i);

b. to knowingly conduct and attempt to conduct financial transactions affectinginterstate commerce and foreign commerce, which transactions involved theproceeds of specified unlawful activity, that is, trafficking in contrabandcigarettes, knowing that the transactions were designed in whole or in part to

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conceal and disguise the nature, location, source, ownership, and control oftheproceeds of specified unlawful activity, and that while conducting and attemptingto conduct such fmancial transactions, knew that the property involved in thefinancial transactions represented the proceeds of some form of unlawful activity,in violation ofTitle 18, United States Code, Section 1956(a)(I)(B)(i); and

c. to knowingly conduct and attempt to conduct financial transactions affectinginterstate commerce and foreign commerce, which transactions involved theproceeds of specified unlawful activity, that is, trafficking in contraband

cigarettes, knowing that the transaction was designed in whole and in part toavoid a transaction reporting requirement under F ederallaw, and that whileconducting and attempting to conduct such financial transaction knew that theproperty involved in the financial transaction, represented the proceeds of someform ofunlawful activity, in violation of Title 18, United States Code, SectionI 956(a)(1 )(B)(ii).

MANNER AND MEANS3. The marmer and means used to accomplish the objectives of the conspiracy included,

among others, the following:a. Members of the conspiracy were engaged in the possession, transportation, and

sale of contraband cigarettes.b. Members of the conspiracy obtained proceeds from the sale of contraband

cigarettes.c. Members of the conspiracy used the proceeds from the sale of contraband

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d. Members of the conspiracy used financial institutions to exchange small-denomination bills for 100-dollar-bills.

e. Members ofthe conspiracy used safety deposit boxes to conceal assets.f. Members ofthe conspiracy created and operated business entities to conceal their

activities.g. Members of the conspiracy opened bank accounts in their own names and in the

names ofvarious businesses.h. Members of the conspiracy used a variety ofpersonal and business bank accounts

in an attempt to conceal the nature, source, and ownership of funds.1. Members ofthe conspiracy leased vehicles to facilitate the transportation of

contraband cigarettes.J. Members of the conspiracy leased and maintained various business locations to

promote their sale of contraband cigarettes.k. Members of the conspiracy engaged in financial transactions exceeding $10,000.1. Members of the conspiracy engaged in the conduct contained in the allegations

alleged in Counts 5S through 65 which are hereby incorporated by reference asthough set forth in full.

4. All in violation ofTitle IS, United States Code, Section 1956(h).

COUNTS 3THROUGH 57(IS U.S.C. 2342(a(Trafficking in Contraband Cigarettes)

1. On or about the dates set forth below, in the Western District ofVirginia, thedefendant(s) listed below, as principles and as aiders and abettors, did knowingly andunlawfully purchase, receive and possess contraband cigarettes, as that term is defined in

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Title 18, United States Code, Section 2341, to wit: a quantity ofmore than 10,000cigarettes which bore no evidence of the payment of applicable State cigarette taxes inthe Commonwealth ofVirginia, in the amounts set forth below.Count Date DefendantC s) Number ofCartons ofContraband Cigarettes

(one carton contains 200cigarettes)3 April 20, 2009 1804 April 23, 2009 1805 May 1,2009 2906 May 7, 2009 1107 May II, 2009 1508 November 4, 2009 6009 November 9, 2009 54010 November 24, 2009 720

I I November 25, 2009 24012 December 1,2009 30013 December 3, 2009 and 600MUSHTAQ AHMAD14 December 17,2009 MOHAMMAD BUTT 132015 December 22, 2009 MOHAMMAD BUTT 675016 December 29, 2009 MOHAMMAD BUTT 360017 December 30, 2009 MOHAMMAD BUTT 288018 January 5, 2010 MOHAMMAD BUTT 228019 March 2, 2010 and 84020 March 4,2010 and 180021 March 9, 2010 and 78022 March 23, 2010 and 5100 .

23 April 13, 2010 138024 April 14, 2010 66025 April 14, 2010 18026 April 21, 2010 210027 April 21, 2010 48028 April 27, 2010 96029 May l l , 2010 and 1200

CHENGZENG30 May 12, 2010 and 1920MUSHTAQ AHMAD

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31 May 18,2010 and 2400MUSHTAQ AHMAD32 May 18,2010 CHENGZENG 72033 May 25, 2010 and 2460CHENGZENG34 May 25, 2010 102035 June 1,2010 and 2520CHENGZENG36 June 7, 2010, CHENGZENG 420at approximately8:30 a.m.37 June 7, 2010, 1680at approximately1:00 p.m.38 June 7, 2010, and 1920at approximately CHENGZENG

2:00p.m.39 June 16,2010 and 4140CHENGZENG40 June 16,2010 2400 '41 June 22,2010 D and 6900CHENGZENG42 July 9,2010 CHENGZENG 72043 July 13, 2010 150044 July 14, 2010 CHENGZENG 96045 August 10,2010 156046 August 17,2010 and 2640

CHENGZENG47 August 26, 2010 and 2640CHENGZENG48 August 31, 2010 CHENGZENG 246049 September 27, 2010 and 3540CHENGZENG50 October 13,2010 CHENGZENG 198051 November 3, 2010 CHENGZENG 216052 November 16, 2010 CHENGZENG 1200 .53 December 7, 2010 CHENGZENG 120054 December 17,2010 CHENGZENG 120055 January 19,2011 and 3750

CHENGZENG56 February 11,2011 CHENGZENG 150057 March 7, 2011 CHENGZENG 18002. All in violation ofTitle 18, United States Code, Sections 2342(a) and 2.USAO#:20IIR00380

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COUNTS 58 THROUGH 65(18 U.S.C. 1956(a)(1)(A)(i) and 1956(a)(1)(B)(i))(Money Laundering-Promotion and Concealment)1. On or about dates listed below, in the Western District ofVirginia, the defendant(s) listed

below, as principals and as aider and abettors, did knowingly conduct and attempt toconduct the following financial transactions affecting interstate and foreign commerce,which involved the proceeds of specified unlawful activity, that is trafficking incontraband cigarettes, with the intent to promote the carrying on of said specifiednnlawful activity, knowing that the transaction was designed in whole and in part toconceal and disgnise the nature, location, source, ownership, and control ofthe proceedsof said specified unlawful activity and that while conducting and attempting to conductsuch financial transactions the defendant knew that the property involved in the fmancialtransactions, represented the proceeds of some form of unlawful activity.Count Date Defendant(s} Transaction58 November 27,2009 exchanged$2,000.00 in twenty dollar billsfor $2,000.00 in hnndred dollarbills.59 November 30, 2009 exchanged$4,000.00 in twenty dollar billsfor $4,000.00 in hnndred dollarbills.60 December 3, 2009 exchanged

i $500.00 in fifty, twenty and tendollar bills for $500.00 inhnndred dollar bills.61 April 9, 2010 exchanged$5,000 in twenty, ten, and fivedollar bills for $5,000 in hnndreddollar bills.62 April 12, 2010 dollar bills for$6,000 in hnndred dollar bills.

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63 April 13, 2010 exchanged$6,000 in twenty dollar bills for$6,000 in hundred dollar bills.64 May 24, 2010 exchanged$4,000.00 in twenty dollar billsfor $4,000.00 in hundred dollarbills.65 June 29, 2010 exchanged$1,200.00 in twenty and onedollar bills for $1,200.00 inhundred dollar bills.

2. All in violation ofTitle 18, United States Code, Sections 1956(a)(1)(A)(i) and1956(a)(I)(B)(i) and 2.

NOTICE OF FORFEITURE1. Upon conviction ofone or more of the felony offenses alleged in this Indictment, the

Defendants shall forfeit to the United States:A. Any property, real or personal, which constitutes or is derived from proceeds

traceable to a violation of 18 U.S.C. 371 and/or 2342, pursuant to 18 U.S.C. 981 (a)(I)(C) and 28 U.S.C. 2461.

B. Any property, real or personal, involved in a violation of 18 U.S.C. 1956, or anyproperty traceable to such property, pursuant to 18 U.S.C. 982(a)(I).

C. Any conveyances involved in a violation of 18 U.S.C. 2342, pursuant to 49U.S.C. 80303 and 28 U.S.C. 2461.

2. The property to be forfeited to the United States includes but is not limited to thefollowing property:A. Money Judgment

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1. A sum of United States currency to be determined, and all interest andproceeds traceable thereto, in that such sum in aggregate was obtaineddirectly or indirectly as a result of said offenses or is traceable to suchproperty.

B. United States Currency and/or financial account(s)1. First Bank, business checking accoimt # , held in the name of

American Market, Inc., (Signature Card:11. First Bank, joint checking account held in the names of

Mohammad and (Signature Card:and

iii. First Bank, business checking account , held in the name ofA&M Tobacco, Inc., T/A The Smoke Shop, (Signature Card:

IV. First Bank, checking account held in the name ofMohammad Butt.

v. First Bank, checking account held in the name of

vi. First Bank, Safe Deposit Box held in the mime of V11. First Bank, Safe Deposit Box held in the name of

C. Vehicles and/or conveyancesI . 2006 Toyota Carmy, VIN 4T1BE32KX6U686930.11. 2001 Toyota Land Cruiser, VIN JTEHT05J012000657.111. 1999 Toyota4Runner, VIN JT3HN87R8X9025357.

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3. If any of the above-described forfeitable property, as a result of any act or omission of thedefendant:

A. cannot be located upon the exercise of due diligence;B. has been transferred or sold to, or deposited with a third person;C. has been placed beyond the jurisdiction of the Court;D. has been substantially diminished in value; orE. has been commingled with other property which cannot be subdivided without

difficulty;it is the intent of the United States to seek forfeiture of any other property of the defendant up tothe value of the above-described forfeitable property, pursuant to 21 U.S.C. 853(P), includingthe assets described above.

A. 2005 Honda Accord LX, VIN lHGCM56425A162823.B. Tax Map No. 75M-4-1-70

i.

ii. BEING the same property conveyed to by Deed datedOctober 31, 2005, from The Ryland Group, Inc. Said Deed is recordedamong the land records ofFrederick County, Virginia, as Instrument#050026079.

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J.HEAPHYUNITED STATES ATTORNEY

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redacted atif indictment

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