Cheaper Cigarettes

Ned Roscoe, a former owner and officer of Cigarettes Cheaper! with Napa ties, was convicted Tuesday in federal court in San Jose of multiple counts of bank fraud.



The fraud occurred while Roscoe ran the 800-store Cigarettes Cheaper! national discount chain with $1 billion in annual revenue, the U.S. Department of Justice said in a news release.

Roscoe, who remains free on $150,000 bail, will appeal his conviction, his attorney, Vicki Young, said Wednesday.



“We believe that this was a civil matter between Comerica Bank and Cigarettes Cheaper. While mistakes may have been made, we disagree that it warranted criminal prosecution. Mr. Roscoe definitely intends to appeal the jury's verdicts,” Young said in a written statement.

Following a month-long trial, a jury found Roscoe, 51, guilty of one count of conspiracy to commit bank fraud and make false statements, 13 counts of bank fraud and 14 counts of false statements to a bank.



The jury agreed that Roscoe, whose company began to suffer financially in late 2002, had knowingly submitted inflated inventory valuations to Comerica Bank in order to keep his cigarette business afloat during financial stress.

Roscoe and his father, 81-year-old John Roscoe, were indicted by a federal grand jury in June 2007, then reindicted on revised charges in September 2011 of conspiracy to make false statements to Comerica Bank.



Evidence presented at trial showed that Ned Roscoe directed accountants between August 2003 and November 2003 to inflate the Benicia-based company’s weekly inventory reports submitted to Comerica Bank in order to obtain more money from Comerica through Cigarettes Cheaper’s $21 million line of credit. Eventually, the company’s inventory value was inflated by more than $16 million, government lawyers said.



John Roscoe, the company’s president who lives in Green Valley, pleaded guilty Jan. 21 to conspiracy to make false statements to Comerica Bank.

Sentencing for Ned Roscoe is June 6 before U.S. District Court Judge Ronald M. Whyte. John Roscoe’s sentencing date has not been set.

Ned Roscoe, who once ran for governor as a Libertarian, could spend decades behind bars.

The maximum sentence for the one count of conspiracy to commit bank fraud is five years and a $250,000 fine. The maximum penalty for each of the additional charges is 30 years in prison and a fine of $1 million.



“I still feel not guilty, but that’s because I was there when the events occurred,” Roscoe said.

In the meantime, Roscoe continues to work in the tobacco industry. “I have a family to support,” he said.



At its peak, in December of 2000, Ned and John Roscoe had opened more than 800 Cigarettes Cheaper! stores in 26 states.



The Roscoes have had other major legal battles. R.J. Reynolds Tobacco Company successfully sued the Roscoes’ company for selling “gray-market” cigarettes from unauthorized sales channels. Cigarettes Cheaper! lost a 2004 jury trial, reportedly costing the Roscoes $19 million in legal fees.