Federal prosecutors will recommend a three-year prison sentence for the owner of the 17-store Capitol Petroleum chain of Madison-area convenience stores after he pleaded guilty Thursday to a conspiracy to sell banned substances said to mimic the effects of marijuana.
A document filed by prosecutors ahead of a plea hearing Thursday before U.S. District Judge James Peterson states that Farooq Shahzad, 49, owner of the chain with stores variously called Capitol Petro and CP Mart, knew that the substance was illegal but wanted to continue selling it after the execution of search warrants at two of the stores in 2015 “because it was so profitable.”
The so-called synthetic cannabinoid is sold under names that include “Spice,” “K2” and “Kush.” Law enforcement agencies have warned in recent years that chemicals in the products are hazardous to users’ health.
The document, called a factual basis, summarizes what prosecutors believe they would have proven had the case gone to trial so that Peterson could accept guilty pleas from Shahzad. It details the steps that Shahzad took to conceal the continued sale of the products at his stores, by documenting them differently from sales of other products at the stores.
In court, Shahzad and his attorney, Stephen Hurley, acknowledged to Peterson that prosecutors could have proven the facts provided in the document.
Shahzad also pleaded guilty to possession of contraband smokeless tobacco, untaxed chewing tobacco that Shahzad bought from distributors who were not licensed to distribute products in Wisconsin.
Assistant U.S. Attorney Antonio Trillo said in court Thursday that he told Shahzad during plea negotiations that he would ask for a three-year prison sentence. A written plea agreement states that Shahzad agreed to waive his right to appeal his sentence if it is no longer than three years.
Shahzad will be sentenced by Peterson on March 20.
Under the plea agreement, the government and Shahzad will also ask at sentencing for a $1 million fine, just short of the $1.25 million maximum fine that Peterson could impose. Shahzad has also agreed to pay $650,000 to avoid the forfeiture of his store at 3505 E. Washington Ave.
According to the government’s factual basis:
Two gas station clerks, unnamed in the document, would have testified that they sold synthetic cannabinoids at Capitol Petro, 3505 E. Washington Ave., from 2012 until Madison police executed search warrants at two Capitol Petro stores in 2015.
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After that, the two would have testified, they continued to sell the product until the end of May 2016 at the direction of Shahzad and another co-conspirator who was also unnamed but was described as a general manager at Capitol Petro.
The manager told clerks after the police raids to document sales of the products as taxable and non-taxable sales, but in 2016 instructed them to stop documenting the sales and instead keep cash proceeds from them out of the gas station’s point-of-sale system.
Federal agents seized business records and computer data during the execution of another search warrant in August 2016. Records showed that sales of taxable and non-taxable goods sharply declined after April 28, 2016.
That was the same date that federal prosecutors in Houston, Texas, indicted more than a dozen people, including Khader Fahed Tanous, as part of a large-scale synthetic cannabinoids manufacturing and distribution ring.
Court records state that Tanous, 52, of Manassas, Virginia, was sentenced in November to just over 10 years in prison.
According to the factual basis in Shahzad’s case, Shahzad ordered Tanous’ products through another man, and after Tanous’ arrest in 2015, that man found another supplier of synthetic cannabinoids and again sold to Capitol Petro through April 2016. Those sales were disguised by invoices listing large amounts of oil, antifreeze and thermal T-shirts.
The general manager would have testified, prosecutors said, that Shahzad wanted to keep selling synthetic cannabinoids even after the 2015 raids “because it was so profitable.”
Also in April 2016, Ross Cotter-Brown, of Edgerton, struck and badly injured two Middleton girls while driving under the influence of the substance, which he said he bought from a Madison gas station.
After news reports of the incident, the general manager would have testified, Shahzad instructed his employees to keep synthetic cannabinoid sales confidential and instead of documenting them, he told them to simply put cash from those sales into an envelope.
In 2017, Shahzad agreed to pay $1.3 million in forfeitures and costs as part of a civil forfeiture case brought against him by the state Department of Agriculture, Trade and Consumer Protection over the sales of synthetic cannabinoids.