.. Case 4:15-cr-00004-JLK *SEALED* Document 3 Filed 04/02/15 Page 1 of 10 Pageid#: 3 UNITED STATES OF AMERICA IN THE UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF VIRGINIA DANVILLE DIVISION : Criminal No.: 4:15CR00004, v. : Violations of: Title 26 U.S.C. 5762(a)(3) Title 18 U.S.C. 2342(b) Title 18 U.S.C. l343 Title 18 U.S.C. 1956(a)(I)(B)(i) KATHRYN CRABTREE FARLEY : Title 18 U.S.C. 1957 CLERK'S OFFICE U,S. DIST. COURT AT ROANOKE, VA FILED for Dville APR 2 2015 JULIA C. DUDLEY, CLERK BY: H. McDonald DEPUTY CLERK INDICTMENT The Grand Jury charges that: Introduction 1. The Bureau ofalcohol, Tobacco, Firearms and Explosives (ATF), administers and enforces the Contraband Cigarette Trafficking Act and A TF regulations pertaining to the shipment, sale or distribution ofcigarettes. The Alcohol and Tobacco, Tax and Trade Bureau (TTB) has been delegated, by Congress, to administer and enforce all laws and regulations governing the federal excise tax (FET) due, as well as the recordkeeping procedures, for all domestic tobacco manufacturers. TIB is responsible for collecting the FET due by cigarette manufacturers. The FET pre-april 1, 2009 was approximately $3.90 per carton. The FET post April 1,2009 is approximately $10.10 per carton. 2. Federal law requires that any person who sold, shipped, transferred or otherwise disposed ofmore than 10,000 cigarettes in a single transaction maintain such records ofthe transaction as the Attorney General may prescribe by rule or regulation. A TF regulations require that any person who sold, shipped, transferred or otherwise disposed ofmore than
Case 4:15-cr-00004-JLK *SEALED* Document 3 Filed 04/02/15 Page 2 of 10 Pageid#: 4 60,000 cigarettes in a single transaction maintain records of the transaction that state the full name of the purchaser (or the recipient if there is no purchaser), the street address (including city and state) to which the cigarettes were destined and the quantity of cigarettes involved in the transaction. 3. Proper and truthful record keeping and documentation as mandated by federal law and regulations is essential to enable A TF to perform its function with regard to the sale, shipment and distribution of cigarettes. False record keeping impedes performance of ATF's function and unduly hinders the effective administration ofjustice. 4. The Alcohol and Tobacco Tax and Trade Bureau (TTB) administers and enforces laws and TTB regulations pertaining to record keeping ofoperations and transactions by cigarette manufacturers, and collection of cigarette excise taxes. 5. Proper and truthful record keeping and documentation as mandated by federal law and regulations is essential to enable TTB to perform its function with regard to record keeping of operations and transactions by cigarette manufacturers, and collection of cigarette excise taxes properly due and owing. False record keeping impedes performance of TTB' s function and unduly hinders the effective administration ofjustice. 6. One standard pack of cigarettes contains 20 cigarettes. One standard carton of cigarettes contains 10 packs of cigarettes. A "master" or "full" case of cigarettes contains 60 cartons (12,000 cigarettes), while a "store" or "half' case contains 30 cartons of cigarettes (6,000 cigarettes). 7. At all times material to this Indictment: a. Firebird Manufacturing, LLC, is a corporation organized and existing under the laws of Virginia, and has manufactured Cherokee brand cigarettes since
Case 4:15-cr-00004-JLK *SEALED* Document 3 Filed 04/02/15 Page 3 of 10 Pageid#: 5 purchasing the manufacturing facility from Virginia Brands, LLC, in early 2010. Firebird Manufacturing, LLC, has also manufactured Seminole and Palmetto brand cigarettes during that time frame. Firebird is located at 1057 Bill Tuck Highway, Building B, South Boston, Virginia 24592, with the Western District of Virginia. Cherokee Tobacco LLC is a wholesaler oftobacco products and is located at 1057 Bill Tuck Highway, Suite 239, South Boston, Virginia 24592, within the Western District of Virginia. b. KATHRYN CRABTREE FARLEY was employed at Firebird Manufacturing as Vice President. In June 2012 she was promoted to President of both Firebird and Cherokee Tobacco Company LLC. COUNTS 1-22 (26 U.S.C. 5762(a)(3)) (Fraudulent Refusal to Payor Evasion of Federal Cigarette Excise Taxes) I. The Introduction is re-alleged and incorporated by reference. 2. Beginning on or about, November I, 2011 and continuing to on or about August 31, 2013, in the Western District of Virginia and elsewhere, KATHRYN CRABTREE F ARLEY, who was Vice President and later President of Firebird Manufacturing LLC, with intent to defraud the United States, willfully refused to pay and attempted to evade or defeat the Federal Tobacco Excise Tax owing by the corporation, or the payment thereot~ by preparing and causing to be prepared, and by signing and causing to be signed, false and fraudulent Excise Tax Returns filed with the Department oftreasury, Tax and Trade Bureau on behalf of the corporation. 3. In those returns the tax due and owing was substantially understated when in truth and
Case 4:15-cr-00004-JLK *SEALED* Document 3 Filed 04/02/15 Page 4 of 10 Pageid#: 6 fact as KATHRYN CRABTREE FARLEY then and there knew, a substantial tax was due and owing. 4. The dates of the biweekly returns, the time period they relate to, and the total tax liability for the pertinent month are as follows: COUNT DATE OF T AX PERIOD OF AMOUNT OF TAX RETURN RETURN LIABILITY UNDERSTATED FOR THE MONTH 1 12114/2011 11116111-11130111 $304,977.42 2 3/7/2012 12116111-12/30/11 $199,999.99 3 4116/2012 1116112-1131/12 $300,672.97 4 411612012 1116112-1131112 $308,574.23 5 4116/2012 3/16112-3/31112 $500,000.01 6 7118/2012 4116112-4/30112 7 6114/2012 5116112 5/31112 ~ 8 7113/2012 6116/12-6/30/12 $560,000.01 9 8113/2012 7116112-7/31112 $759,014.71 10 9113/2012 8/16112-8/31112 $787,037.40 11 9/27/2012 9/16112-9/25/12 $759,509.68 12 1111312012 10116112-10/3 1/12 $550,487.00 12/13/2012 11116/12-11130/12 $764,263.00 14 111112013 12116112 - I 213 1112 $574,392.99 15 2113/2013 1116/13-1/31113 $927,333.99 16 3/12/2013 2/16/13-2/28/13 $808,429.00 17 fr!3 411112013 3116/13-3/31113 $788,297.00 18 5113/2013 4/16/13-4/30113 $1,028,071.95 19 5116112-5/31113 $870,700.68 /2013 6116/13-6/30/13 113 ~ 8/13/2013 7116/13-7/31113 I $718,865.64 9111/2013 8116/13-8/31113 $ 7,247.53 5. All in violation of Title 26, United States Code, Section 5762(a)(3). COUNTS 23-29 (18 U.S.C. 2342(b» (Contraband Cigarette Trafficking Act) 1. The allegations contained in the Introduction are hereby re-alleged and incorporated by
Case 4:15-cr-00004-JLK *SEALED* Document 3 Filed 04/02/15 Page 5 of 10 Pageid#: 7 reference as though set forth in full 2. On or about August 1,2012, to on or about June 6, 2013, in the Western District of Virginia, KATHRYN CRABTREE FARLEY, the defendant, did knowingly make a false statement or representation with respect to information required by law to be kept in the records of a person who ships, sells, or distributes in excess of 60,000 cigarettes in a single transaction. COUNT DATE DESCRIPTION 23 8/112012 Invoice #634171 for Cherokee cigarettes, in the amount of$144,837 i 24 11/6/2012 Invoice #635199 for Cherokee cigarettes, in the amount of$119,700 25 11112/2012 Invoice #635262 for Cherokee cigarettes, in the amount of $128,079 26 11113/2012 Invoice #635263 for Palmetto cigarettes, in the amount 01'$193,914 27 11113/2012 Invoice #635275 for Cherokee cigarettes, in the amount of$53,865 28 5/28/2013 Invoice #637285 for Cherokee cigarettes, in the amount of $172,368 29 5/2812013 Invoice #637288 for Palmetto cigarettes, in the amount of$53,865 3. All in violation oftitle 18, United States Code, Section 2342(b). COUNTS 30-36 (18 U.S.C. 1343) (Wire Fraud) 1. The allegations contained in the Introduction are hereby re-alleged and incorporated by reference as though set forth in full. 2. On or about August 15,2007, to not earlier than December 13,2013, in the Western District of Virginia, KA THR YN CRABTREE FARLEY, the defendant, with the intent to defraud, devised a scheme or artifice to defraud and to obtajn money and property by
Case 4:15-cr-00004-JLK *SEALED* Document 3 Filed 04/02/15 Page 6 of 10 Pageid#: 8 means of false pretenses, representations, and promises, to wit: to obtain the funds of Firebird Manufacturing and Cherokee Tobacco LLC by virtue of a position oftrust, to convert them to her own use, and to conceal the defalcations from her employer. 3. The scheme included but was not limited to: the conversion of her employer's funds through direct deposit manipulation; company checks written for cigarette tax stamps that were deposited in her personal account; payments of Firebird and Cherokee funds for the use offarley's coffee shop business; checks written to FARLEY for personal use or the use ofa coffee shop business she operated; charges to a company American Express card for personal items such as shoe purchases, apparel purchases, college tuition payments and rent payments for her children, and dining; and a wire transfer for the purchases of a boat. 4. For the purpose of executing and attempting to execute the above-described scheme and artifice to defraud and deprive, KATHRYN CRABl'REE FARLEY, in the Westem District ofvirginia, knowingly transmitted or caused to be transmitted by means ofwire, radio, or television communication in interstate or foreign commerce, celiain writings, signs, signals, pictures and sounds for the purpose of executing such scheme or and artifice, as follows: COUNT nate AMOUNT DESCRIPTION 30 8/3/2011 $933.90 AmEx charge to Zappos.com 31 811112011 $168.53 AmEx charge to Belk for Clinique purchase 32 8/14/2011 $182.54 AmEx charge to Victoria's Secret 33 8/2112011 $4,160 AmEx charge for payment oftuition to Radford University 34 1/112013 $1,055.36 Online utility payment to Dominion Power 35 3/22/2013 $55,749.90 Wire transfer to Triad Marine from Cherokee American National Bank Account No. XXXXX6540 for the purchase ofa 2012 Chaparral boat and 2012 Road King trailer
Case 4:15-cr-00004-JLK *SEALED* Document 3 Filed 04/02/15 Page 7 of 10 Pageid#: 9 136 I 12113/2013 I $7,850.00 1Wire transfer for Florida vacation rental 5. All in violation oftitle 18, United States Code, Section 1343. COUNTS 37-42 18 U.S.C 1956(a)(1 )(B)(i) (Money Laundering) 1. That on or about the dates listed below, in the Western District of Virginia, KATHRYN CRABTREE FARLEY, the defendant, did knowingly conduct and attempt to conduct a financial transaction which involved the proceeds of specified unlawful activity, towit: wire fraud in violation oftitle 18, United States Code Section 1343, knowing that the transaction was designed in whole and in part to conceal and disguise the nature, location, source, ownership, and control ofthe proceeds of said specified unlawful activity under State or Federal law, and that while conducting and attempting to conduct such financial transactions, the defendant knew that the property involved in the financial transactions, represented the proceeds of some form ofunlawful activity. 2. That the dates, amounts, and nature of the transaction are as follows: COUNT DATE AMOUNT TYPE OF TRANSACTION 37 January 19, 2012 $23,941.19 38 May 6, 2012 $16,000 39 July 27, 2012 $38,075.25 Purchase of2006 Toyota Tundra with funds from BB&T Accl. No. XXXXX6317 Purchase of 2010 Passport Camper with funds from BB&T Accl. No. XXXXX6317 Purchase of 20 13 Elkridge Camper with funds from BB&T Accl. No. XXXXX6317 40 April 1, 2013 $23,099.74 Purchase of2013 Honda Civic with funds from BB&T Aeet. No. XXXXXXX31 01 41 May 8, 2013 $22,150.27 Purchase of2008 BMW 328i with funds from BB&T Acct. No. XXXXX6317
Case 4:15-cr-00004-JLK *SEALED* Document 3 Filed 04/02/15 Page 8 of 10 Pageid#: 10 June 26, 2008 $400 Cash withdrawal 4. In violation oftitle 18, United States Code, Section 1956(a)(1)(B)(i) and (ii). COUNTS 43-47 18 U.S.C 1957) (Engage in Monetary Transaction with Funds from Specified Unlawful Activity) 1. That on or about the dates listed below, in the Western District ofvirginia, KATHRYN CRABTREE FARLEY, the defendant, did knowingly engage and attempt to engage in monetary transactions by through or to a financial institution, affecting interstate or foreign commerce, in criminally derived property of a value greater than $10,000, that is the transactions described below, such property having been derived from a specified unlawful activity, that is, contraband cigarette trafficking and wire fraud. 2. That the dates, amounts, and nature of the transaction are as follows: COUNT DATE AMOUNT TYPE OF TRANSACTION 43 January 19, $23,941.19 Purchase of 2006 Toyota Tundra with funds from BB&T Acct. No. XXXXX6317 2012 44 Purchase of 2010 Passport Camper with May 6,2012 $16,000 funds from BB&T Acct. No. XXXXX6317 45 Purchase of 2013 Elkridge Camper with July 27, 2012 $38,075.25 funds from BB&T Acct. No. XXXXX6317 46 April 1,2013 $23,099.74 Purchase of2013 Honda Civic with funds from BB&T Acct. No. XXXXXXX3101 47 May 8, 2013 $22,150.27 Purchase of 2008 BMW 328i with funds from BB&T Acct. No. XXXXX6317 3. In violation of Title 18, United States Code, Section 1957.
Case 4:15-cr-00004-JLK *SEALED* Document 3 Filed 04/02/15 Page 9 of 10 Pageid#: 11 NOTICE OF FORFEITURE 1. Upon conviction ofone or more of the felony offenses alleged in this Indictment, FARLEY shall forfeit to the United States: (a) Any property intended for use in violating the provisions ofchapter 52 of the Internal Revenue Code, or regulations thereunder, or which has been so used, shall be forfeited to the United States pursuant to 26 U.S.C. 5763(d); (b) Any property constituting, or derived from, proceeds obtained directly or indirectly or traceable to a violation ofany offense constituting a "specified unlawful activity", pursuant to 18 U.S.C. 981 (a)(2), 982, and 28 U.S.C. 2461 from the commission of the scheme to defraud; (c) Any property, real or personal, involved in said offenses, or any property traceable to such property, pursuant to 18 U.S.C. 982(a)(1). 2. The property to be forfeited to the United States includes but is not limited to the following property: (a) Money Judgment Not less than $ 1,098,991.23 in United States currency and all interest and proceeds traceable thereto, in that such sum in aggregate was obtained directly or indirectly as a result of said offenses or is traceable to such property. (b) Vehicles 1. 2008 BMW 328i, VIN WBVA37598NL51202; 2. 2013 Honda Civic, VIN 2HGFB2F5XDH538484; 3. 2006 Toyota Tundra, VIN 5TBDT48136S36150; 4. 2013 Heartland Elkridge 37ULTA Camper, VIN 5SFRG41290E255407;
Case 4:15-cr-00004-JLK *SEALED* Document 3 Filed 04/02/15 Page 10 of 10 Pageid#: 12 5. 2012 Chaparral Boat, Serial No. FGB70188A212; 6. 2012 Road King Boat Trailer, Serial No. 5KZBB2220CA031888. 5. If any of the above described forfeitable property, as a result of any act or omission of the defendant cannot be located upon the exercise of due diligence; has been transferred or sold to or deposited with a third person; has been placed beyond the jurisdiction ofthe Court; has been substantially diminished in value; or has been commingled with other property which cannot be subdivided without difficulty; it is the intent ofthe United States to seek forfeiture ofany other property ofthe defendant up to the value ofthe above described forfeitable property pursuant to 21 U.S.C. 853(p). 6. All in accordance with Title 18, United States Code, Sections 981(a)(l) and 981 (a)(2), 982, and Title 26, United States Code, Section 5763(d). A TRUE BILL this ~ day of A(/I I (,2015. s/grand Jury Foreperson FOREPERSON