Two Plead Guilty in Fuel Tax Scheme

Two New York men have pleaded guilty to trying to avoid paying more than $77 million in federal motor fuel excise taxes, the Department of Transportation’s inspector general announced.

Daniel Pagano of Monsey, N.Y., an alleged member of the Genovese organized crime family, was part of an illicit cartel that extorted millions of dollars from Russian organized criminals and others operating illegal or "bootleg" gasoline and diesel schemes in New Jersey and New York, federal investigators said.

Anthony Palumbo of Bronxville, N.Y., an alleged associate of the Genovese crime family supervised by Pagano, assumed responsibilities in Pagano’s absence. Both men were indicted by a federal grand jury in September.

Sentencing is set for March 15. They face a maximum 20 years in prison and a fine of either $250,000 or up to twice the gross amount of any profit from the offense or loss by any of the scheme’s victims.

Investigators said Pagano directed subordinates to intimidate, and when necessary use violence, to profit from the bootleg fuel market. They said he collected on behalf of the Genovese family a "mob tax" based upon the number of gallons of fuel sold each month by the bootleggers, investigators said.

Palumbo and Pagano also used "daisy-chains" to avoid paying taxes. In the "daisy chain" scheme, false records made it appear that the fuel passed through a series of wholesale distributors before reaching the retail pump. Each wholesale distributor would appear to be invoiced by the company above it in the chain, with each invoice reflecting a slightly higher price per gallon than the price paid by the seller, giving the appearance of legitimate sales.

For the full story, see the Feb. 2 print edition of Transport Topics. Subscribe today.