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Decade-Long Cigarette Probe Leads To Arrests

Wed, 10/05/2011 - 8:45am
Brett Barrouquere, Associated Press

LOUISVILLE, Ky. (AP) -- A tobacco distributor closely watched by federal agents for a decade has been charged in Kentucky with using phony invoices to avoid paying taxes on millions of dollars' worth of cigarettes that he sold in several states.

As far back as 2002, prosecutors in Texas sought to secretly listen to cell phone conversations involving 41-year-old Pedro "Peter" Bello of Miami, Fla. He was linked to several large-scale investigations and named in a civil lawsuit brought by the city of New York over untaxed cigarettes, but never charged until now.

Bello was arrested Tuesday on a charge of conspiracy to commit wire fraud. Authorities say he bought massive amounts of cigarettes in Kentucky but used invoices written by a company he owned in Missouri to avoid paying sales taxes. He then sold the cigarettes around the country while pocketing bigger profits by avoiding the Kentucky tax.

The indictment against him says that his Louisville-based company GT Northeast avoided paying $2 million in taxes on $12 million worth of cigarettes it sold. But details of previous investigations indicate the scope of his operations were much larger.

A woman answering the phone at a number in Miami listed for Bello said he no longer lived at that house. The woman declined to give her name before hanging up. Bello is scheduled for arraignment Oct. 18 at 9:30 a.m. in Louisville.

The Bureau of Alcohol, Tobacco, Firearms and Explosives in Miami, which took custody of Bello, did not immediately return a call Wednesday morning.

The federal government has cracked down in recent years on contraband cigarettes -- smokes sold by people and businesses through illegitimate channels to avoid paying taxes. The Department of Justice estimates that federal, state and local governments lose out on $5 billion annually in tax revenue from the cigarette schemes.

Bello's name has surfaced in several investigations at the heart of the ATF's crackdown. Federal court records from Kentucky, New York and Texas depict Bello as a man involved in moving millions of cigarettes around the country without paying taxes to various states.

Bello was a subject of the Texas investigation in 2002 in which federal prosecutors sought to secretly listen in on the cell phones of dozens of people suspected of trafficking in contraband cigarettes. He avoided indictment, but 15 others were charged, with 13 people pleading guilty or being convicted. Prison sentences ranged from a year to six years behind bars.

The current case against Bello is also tied to an ongoing civil forfeiture case in Kentucky against Chavez Inc., which sold cigarettes online before federal investigators shut it down in 2009.

Bello is mentioned frequently in a search warrant for Chavez Inc., written by John Black, a special agent for the Bureau of Alcohol, Tobacco, Firearms and Explosives. The company is suspected of selling $132 million in cigarettes online while avoiding paying a variety of taxes to states, including $2.3 million in excise taxes to Kentucky.

Black wrote that Chavez shipped untaxed cigarettes to New York, New Jersey, Pennsylvania, Michigan, Montana and Indiana. The allegations are supported by plea agreements by three others in Mississippi.

Chavez, Bello and three dozen others are also the subject of a civil suit brought by the city of New York, alleging a scheme to illegally ship cigarettes into the area, which were then sold untaxed on the black market. The suit seeks $6.5 million in unpaid taxes from Chavez and its major New York City customers, plus $13 million in penalties.

Chavez Inc., and its owners, Israel Chavez of Louisville and his ex-wife, Pam Chavez of Stockton, Calif., have not been charged criminally. Israel Chavez and Bello were business partners in a company called CD Wholesalers in Louisville from 2003 through 2005.

Kent Wicker, who represents Pam Chavez, declined to comment on Bello's indictment.

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