Sweetheart deal!

By Troy Torres

troy@kanditnews.com

Newly-disclosed information from the Guam Department of Revenue and Taxation shows the Calvos got a sweetheart deal on the payment of cigarette taxes from the administration of one of their own: former Gov. Eddie Calvo.

In a precedent-setting release of tax information from the Guam DRT, government officials have, for the first time, released details on the overdue payment of taxes by MidPac, a multimillion-dollar Calvo-owned cigarette and alcohol distribution company.

The DRT in June 2017 (under the Calvo administration) secretly negotiated a tax settlement agreement with MidPac, which failed to pay taxes on cigarettes sold between 2014 and 2017. The government agreed to settle the tax liability at $14.7 million, and a tax lien was placed on the company.

Public discovery of the tax liability when the lien was leaked to the media in 2018 led to the unanimous passage of the Cigarette Tax Stamp Program fathered by then-Sen. Michael San Nicolas. Mr. San Nicolas questioned the settlement amount, asking DRT what the original tax liability was, then discovering that the agency failed to properly assess the taxes. In a nutshell, DRT failed in its responsibility under the law to count the number of cigarettes MidPac was bringing into the island and taxing MidPac for those cigarettes.

Then-Speaker Benjamin Cruz wrote to the U.S. Attorney and the Federal Bureau of Investigation asking for a federal investigation into the Calvos and the Calvo administration and alleging a conspiracy involving tax fraud and evasion.

Its general manager at the time, John Calvo (first cousin to Gov. Calvo), said the non-payment was a mistake, discovered through internal audit, then self-reported to the DRT.

No other information has ever been officially released about the tax settlement. The settlement itself has never been publicly disclosed. The public was never told how much the Calvos had to pay back per month, or whether they were paying the overdue taxes as required by the settlement agreement.

Until today.

According to deputy director of revenue and taxation Frank Leon Guerrero, of the $14.7 million MidPac owed from the settlement agreement, MidPac made an initial payment of $1 million. The company, in accordance with the terms of the Calvo-arranged settlement agreement, is only required to pay $75,000 a month until the balance of the taxes are paid.

"In addition to an initial million dollars, the company has been making monthly payments of $75,000.00 per month since about July of 2017," Mr. Leon Guerrero confirmed to Kandit. "They are now approaching their fifth year of payments."

Of the recorded tax liability of $14.7 million, MidPac so far has paid down $4.6 million. According to the information provided by Mr. Leon Guerrero, it will take MidPac at least 10 more years to pay the balance of the principal tax liability owed.

Kandit has requested more information about the balance, to include interest and penalties, and the settlement agreement itself.

At $75,000 per month, the government under Gov. Calvo agreed to allow MidPac to pay only $900,000 annually. To place this into perspective, the tax lien for the $14.7 million liability shows that the average monthly taxes MidPac failed to pay between 2014 and 2017 was north of $400,000. Gov. Calvo's administration allowed Calvo-owned MidPac to pay the taxes owed at a monthly rate of less than 20 percent of monthly taxes owed over a multi-decade period.

And whether that $14.7 million is all MidPac owes for those cigarettes sold in those years remains an unanswered question. Mr. Leon Guerrero was unable to provide the original and true tax liability, informing Kandit only that the "Recorded amount is $14,766,007.60."

Mr. Cruz, who now is the public auditor, pointed out to the FBI and the U.S. Attorney the grim reality that because of DRT's past failure to count the imported cigarettes, it is believed the company and perhaps other cigarette distributors owe much more in cigarette taxes.

The Office of Public Accountability currently is undertaking a comprehensive audit of cigarette and alcohol taxes, and has pledged to include the MidPac questions in its review.