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7.1. SR 12-17-2007acy or Elk. .~ REQUEST FOR ACTION River To Ci Council Item Number ~ . 1 . Agenda Section Meeting Date Prepared by Administration December 17, 2007 Jeff Beahen, Police Chief Tina Allard, Ci Clerk Item Description Reviewed by Consider Tobacco License for Steve's Smoke Shop, Inc.-Sabry Lori ohnson, Ci Administrator Wazwaz Reviewed by Peter Beck, Ci Attorne Action Requested Council motion to approve or deny renewal of a tobacco license to Sabry Wazwaz for Steve's Smoke Shop, Inc. Council direction on whether to proceed with revocation of the tobacco license for Steve's Smoke Shop, Inc. Background/Discussion Sabry Mohamed Wazwaz is requesting renewal for 2008 of his tobacco license for Steve's Smoke Shop, Inc., located at 19112 Freeport Street. On October 16, 2007, staff sent a letter to Mr. Wazwaz advising him that the city would revoke the license to sell tobacco at this address because the license holder is no longer eligible to hold a license to sell tobacco within the city. This finding was based upon the fact that Mr. Wazwaz pled guilty on August 28, 2007 to a felony charge in a federal indictment, which reads: `From in or about 1996 through and including the date of this Indictment, in the State and District of Minnesota, the defendant and others, did unlau fully, willfully and kno~vin~ conspire, combine, confederate and agree with each other and with other persons known and unknown to the grand jury to: A. Defraud the United States ofAmerica by impeding, impairing obstructing, and defeating the lawful governmental functions of the II~.S and the Treasury Department of the United States in the ascertainment, computation, assessment, and collection of tax revenue by concealing the true sources, amounts and disposition of income received by each of the defendants by virtue of their ownership and control of the retail tobacco stores listed in paragraphs 609 above; and B. Commit mail and wire fraud through a scheme and art~ce to defraud the State of Minnesota of its sale tax revenues, and to obtain money and property from the State of Minnesota by means of material false and fraudulent representations and promises, by ystematically underreporting the dollar value of cigarettes sold at each of the retail tobacco stores listed in paragraphs 609 above, in violation of Title 18, United States Code, Sections 1341 and 1343. " S:\Council\Clerk\Tobacco\2007\Wazwaz 121207.doc Steve's Smoke Shop, Inc. is listed in the indictment along with this same address owned by Mr. Wazwaz in the past under different business names. Mr. Wazwaz and his attorney responded to the November 16, 20071etter, stating that Mr. Wazwaz had not been convicted of the crime he pled guilty to and that he has not been scheduled for sentencing. They also requested a hearing on the tobacco revocation. Per Minnesota Statute 364.03(1) Notwithstanding any other provision of law, no person shall be disqualified from pursuing, practicing, or engaging in any occupation in which a license is required due to a prior conviction, unless the crime for which convicted directly relates to the license being sought. In addition to the guilty plea entered by Mr. Wazwaz, the city received a letter from him on October 19, 2007 addressed to the City Clerk, in which Mr. Wazwaz admits that he previously sold tobacco products without possessing the required sub-jobber license and that the case was settled with the Minnesota Department of Revenue. Staff has concerns about continuing to license this person and his business. His history demonstrates he has not been rehabilitated; and therefore cannot serve the public in a fair, honest, and open manner and would be a detriment to the public's safety. Staff seeks direction from the Ciry Council on whether to proceed with the revocation hearing. Staff recommends that if a hearing is held it be held before an independent hearing examiner, who can make a recommendation to the Ciry Council. Such a hearing will involve costs for the hearing examiner, for staff time, and for the City Attorney's office to prepare and present the case for revocation to the Hearing Examiner. If the City Council decides to proceed with the revocation hearing, staff recommends that the existing license be renewed for three months to allow time for the hearing to be held. If the City Council decides not to proceed with the revocation hearing, staff recommends that the license be renewed for 12 months, as in the past. Staff does not recommend that renewal of the license be denied without a hearing. Side Note About November 1, 2007, a Mr. Ali Sadeq requested to apply for a new tobacco license for the same location on Freeport. After being informed about the tobacco moratorium, Mr. Sadeq suddenly became a partner with Mr. Wazwaz that was effective just prior to the moratorium (per city ordinance, all tobacco licenses shall be valid only for the person to whom the license was issued). Mr. Wazwaz requested to amend the license with his partner but was told he couldn't due to the moratorium. Mr. Wazwaz has since proceeded to apply for the renewal of the tobacco license on his own. Mr. Wazwaz stated he amended his license to include a partner in July 2007 and failed to notify the Ciry. His business is currently listed as a domestic corporation with the Secretary of State. Mr. Wazwaz has gone back and forth on whether he is a partnership or owns the business himself in order to be able to apply fox a tobacco license. S:\Council\Clerk\Tobacco\2007\Wazwaz 121207.doc Financial Impact Minnesota Office of Administrative Hearing (OAH) fees are $160 an hour for an administrative law judge, which includes hearing, writing, and travel time. Expenses such as lodging, meals, and mileage are billed when a judge needs to travel outside the metro area. OAH staff attorneys are often involved in the preparation of recommended written orders. Staff attorney time is billed out at $80 per hour. Attachments ^ Star Tribune article dated August 29, 2007 ^ October 16, 20071etter to Wazwaz ^ Letter dated October 19, 2007, from Sabry Wazwaz to Clerk Allard ^ Letter dated October 22, 2007, from Nancy Vanderheider, Attorney for Sabry Wazwaz Action Motion by Second by Vote FOIIOW Up S:\Council\Clerk\Tobacco\2007\Wazwaz 121207.doc 8th guilty plea ties another knot in a complicated web of family and fraud Page 1 of 3 i ~talrTll'ib~r~eacor~~ I~~I~r~1A~~~~-~.~~uL.r.~~lvl~:~o~r~ 8th guilty plea ties another knot in a complicated web of family and fraud Four groups of brothers were accused in a tax-fraud conspiracy involving cigarette sales taxes. A ninth defendant is expected to plead next week. By Dan Browning, Star Tribune Last update: August 29, 2007 - 9:44 PM Taleb Mohamed Wazwaz appeared in federal court Wednesday on his 41st birthday to plead guilty to conspiring with a dozen other men to cheat the state out of more than $2.5 million in sales taxes by concealing revenues from some Twin Cities tobacco stores. He still may face charges in a mortgage fraud investigation that implicated him and at least seven of his co-defendants. Wazwaz was the eighth defendant to plead guilty thus far in the tax-fraud conspiracy, and another is expected to plead guilty next week. Most of the defendants belong to four groups of brothers identified by their names: Othman, Mohamed, Yassin and Mahmoud. They owned tobacco stores in the Twin Cities and concealed the revenue and expenses of those stores or the identities of the people deriving economic benefit from their operation, according to the indictment. Plea agreements made public thus far reveal that federal agents are also investigating the defendants for crimes related to mortgage fraud. In exchange for pleading guilty in the tax-fraud case, the government agreed not to bring mortgage fraud charges against most of the men. ~~ One exception was Sabry Mohammed Wazwaz, 30. He pleaded guilty Tuesday to conspiracy in the tax-fraud case, and also to a new charge of conspiring to commit mortgage fraud. He admitted to buying two duplexes in St. Paul in 2005, then fraudulently reselling them as condominiums to straw buyers with the use of inflated appraisals and other falsified documents. The plea agreement puts the loss from Sabry Wazwaz's crimes between $1 million and $1.3 million. It calls for a sentence of 37 to 46 months in prison, a fine up to $75,000, restitution and up to three years of supervised release. On Wednesday, Assistant U.S. Attorney David MacLaughlin told Taleb Wazwaz that he could settle pending mortgage fraud charges. But he refused the government's offer without comment. He faces from 12 to 21 months in prison, a fine of up to $30,000 and restitution in the tax-fraud conspiracy. http://www.startribune.com/467/v-print/story/1391137.html 9/4/2007 October 16, 2007 BY CERTIFIED MAIL -RETURN RECEIPT REQUESTED Shop Address Steve's Smoke Shop, Inc. Sabry Mohamed Wazwaz, (Steve) 19112 Freeport Street NW Elk River, MN 55330 Home Address 2832 Aspen Lake Drive NE Blaine, MN 55449 Re: Notice of Revocation of Tobacco License Steve's Smoke Shop, Inc., 19112 Freeport Street NW, Elk River, MN 55330 Dear Mr. Wazwaz: Pursuant to Section 26-63(2) of the Elk River City Code of Ordinances, a person convicted within the past five years of any violation of a federal, state or local law, ordinance provision, or other regulation relating to tobacco, tobacco products, or tobacco-related devices is ineligible to hold a license in the City of Elk River for the sale of tobacco, tobacco products or tobacco- related devices. Pursuant to Section 26-63(5) of the Elk River City Code of Ordinances, a person prohibited by federal, state, or local law, ordinance, or other regulation from holding a license to sell tobacco, tobacco products or tobacco-related devices is ineligible to hold a license in the City of Elk River for the sale of tobacco, tobacco products or tobacco-related devices. Pursuant to Section 38-35(c) of the Elk River City Code of Ordinances, the failure of the holder of a license issued by the City of Elk River or the holder's agents, employees, representatives or lessees, directly or indirectly, to comply with the provisions of the license, of the Elk River City Code, or of any other law, ordinance or regulation pertaining directly or indirectly to the operation or conduct of licensed activities, is grounds for the revocation of the license issued by the City of Elk River. Steve's Smoke Shop, Inc. Page 2 October 11, 2007 It has come to the City of Elk River's attention that on August 28, 2007, you pled guilty to Count I of a federal indictment, that this guilty plea was accepted, and that you will be sentenced next month. The count pled guilty to alleges as follows: That you did unlawfully, willfully and knowingly conspire, combine, confederate and agree with each other and other persons both known and unknown to: Defraud the United States of America by impeding, impairing, obstructing and defeating the lawful governmental functions of the IRS and the Treasury Department of the United States in the ascertainment, computation, assessment, and collection of tax revenue by concealing the true sources, amounts and disposition of income received by each of the defendants by virtue of their ownership and control of the retail tobacco stores listed in paragraph 6-9 above...paragraph 6-9 does include the retail tobacco store known as Steve's Smoke Shop, Inc. located at 19112 Freeport Street NW in the City of Elk River, Minnesota. This letter will constitute your notice that the license granted for the sale of tobacco, tobacco products or tobacco-related devices at Steve's Smoke Shop, Inc., 19112 Freeport Street NW, Elk River, Minnesota 55330 (the "License") will be revoked effective 31 days from your receipt of this letter, unless a written demand for hearing is received by the City within 30 days of your receipt of this letter, as provided below. The City is revoking the License because the license holder is no longer eligible to hold a license for the sale of tobacco, tobacco products, or tobacco-related devices within the City. The grounds for the revocation of the License are the license holder's guilty plea to a violation of federal law directly relating to the operation or conduct of the licensed activities; and the fact that this guilty plea renders the licensee ineligible to hold a license for the sale of tobacco, tobacco products ortobacco-related devices with the City of Elk River. You have the right within 30 days after receipt of this notice of the revocation of the License to demand a hearing before the City Council. Such demand must be in writing and delivered to the City Clerk within 30 days of your receipt of this notice. Failure to request a hearing by written demand within 30 days of the receipt of this notice will be cause for automatic revocation of the License, and will result in the License being revoked effective the 31S` day from your receipt of this notice. If a written demand for hearing is received within 30 days of your receipt of this notice, as provided above, a public hearing on the revocation of the License will be scheduled before the Elk River City Council. You will be provided with written notice of the date and time of the Steve's Smoke Shop, Inc. Page 3 October 11, 2007 public hearing at least ten days prior thereto. You will be given an opportunity to be heard at this public hearing and may be represented by counsel. The Council will hear your evidence and any other evidence that comes before it with respect to grounds for revocation of the License. The Council will then state its findings and make a decision. If the Council's decision is to revoke the License, that revocation will take effect immediately. You will find the process for this proceeding set forth in § 38-35 of the Elk River City Code of Ordinances, which is available at the City's website, www.ci.elk-river.mn.us. Very truly yours, Tina Allard City Clerk c: Lori Johnson, City Administrator Jeff Beahen, Police Chief Peter Beck, City Attorney Gr:aa~sa~9 ~i VANDERHEIDER LAW OFFICE October 22, 2007 Tina Allard City Clerk City of Elk River ®~'T 13065 Orono Parkway +~ ¢ Elk River, MN 55330 ?~~1 Re: Notice of Revocation of Tobacco License Steve's Smoke Shop, Inc. Dear Ms. Allard: I am in receipt of pour letter dated October 1G, 2007, regarding the above-referenced matter. My client, Sabry Wazwaz is the owner of Steve's Smoke Shop, Inc. He received pour letter on Octoberl9, 2007. He has already responded to your letter in written form-and sent that to you. His letter was written and sent without an attorney having seen it. I represent Mr. Wazwaz in a criminal matter before the United States District Court in Minneapolis. This is the matter to which you refer in your letter. I would be very interested to know the source of the information for pour letter, as it is inaccurate. To date, Mr. Wazwaz has not been convicted of the crime to which you. refer. He is not scheduled for sentencing next month or at any time, to date. I invite you to contact the District Court Clerk's office to verify this information. That telephone number is 612-6645200. Because there is no conviction of any "federal, state or local law, ordinance provision, ox other regulation relating to tobacco, tobacco products, or tobacco-related devices", (Elk River City Code of Ordinances X26-63(2)), Mr. Wazwaz continues to be eligible to hold the tobacco license issued by your City. The City has no basis to revoke the license. Unless you can point to some other basis for the revocation, there is no need for Mr. Wazwaz to appear before your City Council However, if the City takes the position that it has a basis for revoking the tobacco license, we request notification of the basis, request a hearing and that I be notified of the scheduled hearing. If you have any questions or if you need further information, please contact me. Sincerely, ancy R erheider NRV Cc: Sabry Wazwaz P.O. BOX 600066. ~ ST. PAUL, MINNESOTA ~ 55106 TELEPHONE: 651/340-6142 ~ FAX: 651/340-6143 R At4 TT T.TAV DAi IIRA/:.l !'/1 A!/'ACT T.T R'T