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Man gets prison for contraband cigarette scheme

A Chicago man who admitted to buying 455,000 packs of cigarettes in Kentucky and illegally reselling them in Chicago and New York, which have higher tobacco taxes, was sentenced to 30 months in prison Monday.

Howard J. Mui, 42, bought 9 million cigarettes in Madison and Fayette counties from December 2005 to January 2008. He bought them in Kentucky because it has one of the lowest cigarette taxes in the nation, 30 cents a pack.

Mui then resold the cigarettes in Chicago's "Chinatown," which has a $3.66 a pack tax, and in New York, where the tax is $4.25. The illegal business netted Mui $1.27 million, according to court records.

Mui did not remit the applicable taxes to Illinois and New York local and state governments, which is a crime.

"I guess the temptation (for profit) was too much," said his attorney, Ned Pillersdorf.

In May, Mui pleaded guilty to transporting, receiving, possessing and purchasing 10,000 or more contraband cigarettes without paying state and local cigarette taxes. Mui also pleaded guilty to knowingly possessing counterfeit cigarette-tax stamps.

Kyle Edelen, a spokesman for the U.S. Attorney's Office in Lexington, called it "one of the biggest cases (of contraband cigarettes) we've had."

Mui admitted his wrongdoing to U.S. District Judge Joseph Hood. He asked for probation because he said he's willing to cooperate with the federal government in future prosecutions.

Hood sentenced Mui to 30 months but said prosecutors could come back within 12 months and ask for a more lenient penalty if Mui cooperates.

Prosecutors said in court Monday that they had met with Mui twice and that he wasn't helpful.

Mui was ordered to repay $492,543.80 in lost taxes to Illinois; $876,620 to Cook County, Ill.; $298,050.80 to Chicago; $25,200 to New York State, and $25,200 to New York City.

Mui also has to repay $30,000 to the state of Michigan and $31,185 to Kentucky for counterfeit cigarette-tax stamps.

Hood fined Mui $1.27 million for the illegal proceeds from the cigarette business.

Mui's wife, Pei Yi Mui, also was charged. Her case is pending.