Attorney General Bonta Announces Guilty Plea and Sentencing of San Francisco Grocery Store Owners for Illegal Tobacco Distribution

OAKLAND – California Attorney General Rob Bonta today announced the sentencing of Huichang Wu and Zhenyu Wu, a sibling duo that ran an illegal tobacco import and sales operation in San Francisco. Together, the pair imported over 2,700 cartons of illegal Chinese cigarettes for sale out of D&K Herb and Grocery, a grocery store they owned and operated in the city. They were both sentenced to two years of formal supervised probation. In addition, the defendants will pay $77,576 to the California Department of Tax and Fee Administration (CDTFA) and $50,000 in investigative costs to the California Department of Justice’s (DOJ) Tax Recovery in the Underground Economy (TRUE) Task Force.

“When individuals take part in illegal business activity, they are not only hurting the economy, they are hurting the community where they do business,” said Attorney General Bonta. “The law is not optional, and business owners operating in California must abide by our regulations. Thank you to our agents and partners in the Tax Recovery in the Underground Economy Task Force for a thorough investigation, and for holding these defendants accountable.” 

“Tax evasion is unfair to Californians. It deprives our communities of resources for public safety, transportation, schools and other important services. It also puts honest, tax-paying businesses at a disadvantage,” said California Department of Tax and Fee Administration Director Nick Maduros. “That’s why it’s important for our departments to work together on cases like these.”

From April 2020 to June 2020, the defendants knowingly purchased cigarettes from an unlicensed distributor or wholesaler in China to sell in the United States, and imported thousands of these cigarettes through various mail centers in an attempt to avoid paying the taxes owed to the CDTFA. Under the California Cigarette and Tobacco Products Licensing Act of 2003, it is unlawful for a retailer to buy cigarettes or tobacco products from anyone who is not licensed or to possess these cigarettes without paying the required taxes.

In December 2021, both defendants pled guilty to one count of Purchasing Cigarettes from an Unlicensed Distributor. As part of their plea agreement, the defendants will surrender their cigarette and tobacco retailer's license. They will also relinquish all money, property, or evidence, including the cigarettes, seized during the investigation.

Today’s sentencing is a result of an investigation by DOJ and the CDTFA Investigations Bureau. Both agencies are part of the TRUE Task Force, which also includes the California Franchise Tax Board and the Employment Development Department. TRUE was created to ensure multiagency collaboration and combat wage theft, tax evasion, and other crimes in the underground economy. The task force consists of attorneys, investigators, and special agents from the member agencies. 

A copy of the complaint is available here.