Attorney General Hardy Myers today announced plea agreements in the two largest tobacco tax evasion cases in Oregon history. The settlements, one with Willamette Valley Distributing and the other with H&K Distributing, represent more than $2 million in evaded tobacco taxes. The indictments and subsequent plea agreements were obtained through the efforts of the state's Tobacco Tax Compliance Task Force.
Willamette Valley Distributing (WVD) and its owner, Michael Miller, were one of the largest tobacco product distributors in Oregon. Following a two-year investigation, Miller and WVD were indicted in Marion County on 32 counts including racketeering, tobacco and cigarette tax evasion, false reporting of tax information, money laundering and unlawful distribution of cigarettes.
On Monday, November 22, 2004, WVD and Miller plead guilty to racketeering and unlawful distribution of cigarettes. The remaining counts were dismissed.
Under the terms of the plea agreement, WVD and Miller will pay $1.5 million in evaded tobacco taxes. Miller has already paid the Oregon Department of Revenue (DOR) nearly $1.2 million of the restitution to be ordered. Miller will be sentenced to one year in Marion County jail. Finally, WVD will liquidate all assets, have its tobacco and cigarette licenses revoked and be dissolved by court order as part of the final resolution of the case.
Today, Ronald Kent Hartley, owner of Portland-area tobacco distributing business H&K Distributing, also plead guilty to charges of racketeering as well as computer crime and filing false tobacco tax returns.
H&K principally distributed merchandise known as "other tobacco products," which includes chewing tobacco and other smokeless tobacco products. The products are taxed at 65 percent of their wholesale value; however, unlike with cigarettes, distributors are not required to purchase and affix tax stamps to the products they sell. Rather, distributors must self report the tax liability to DOR.
Hartley purchased products from a source on the Yakima Indian Reservation that does not pay state tobacco tax. Consequently, he was required by Oregon law to report and pay state tobacco taxes prior to reselling the product.
Beginning in 2002 and continuing throughout 2003, Hartley and his business were investigated for racketeering, tobacco tax evasion, computer crime, filing false tobacco tax information, forgery, money laundering, and income tax evasion. The investigation culminated a 30-count indictment citing a tax loss to the state of more than $1 million.
Under the terms of today's plea agreement, Hartley was sentenced to a total of 13 months in the Clackamas County jail and ordered to pay nearly $1.7 million in restitution. In addition, Hartley forfeited more than $20,000 in cash as well as a handgun. The court ordered H&K Distributing LLC to be dissolved and Hartley divested of all interest in the company.
Both cases were investigated and prosecuted by the Oregon Tobacco Tax Compliance Task Force, which is made up of representatives from the state's Department of Revenue, Department of Justice and Oregon State Police. The task force was created by the Legislature in 2001 to protect the state's tobacco tax revenue. The task force has already generated approximately $10 million in additional revenue from other tobacco products.
"Oregon has a zero-tolerance policy for tobacco tax evasion," Attorney General Myers said. "These criminal enterprises are undercutting lawful businesses and, more importantly, they are stealing critical funding for essential state programs such as the Oregon Health Plan, the State School Fund and state law enforcement services."
Steve Briggs, (503) 378-6347 or (503) 932-1763