Restaurant Owner Sentenced to Prison for $2 Million Tax Fraud Scheme

Restaurant Owner Sentenced to Prison for $2 Million Tax Fraud Scheme

Vanessa Roberts Avery, United States Attorney for the District of Connecticut, announced that WILLIAM CHEN, 49, of West Hartford, was sentenced today by U.S. District Judge Stefan R. Underhill in Bridgeport to 18 months of imprisonment, followed by one year of supervised release, for operating an extensive tax fraud scheme involving Connecticut and Massachusetts restaurants that he owned and operated.  Judge Underhill also ordered Chen to pay a $20,000 fine.

According to court documents and statements made in court, Chen was a part owner of several restaurants, including Ginza Japanese Restaurant in Bloomfield, Ginza Japanese Cuisine in Wethersfield, Kaliubon Ramen in Wethersfield and West Hartford, and Feng Asian Bistro in Hartford and Canton, and Millbury, Massachusetts.  Chen was responsible for purchasing and using the Point-of-Sale (POS) system for restaurant orders, and for training staff on the use of the POS system.  In connection with the POS system, Chen paid an additional fee to activate “zapper” software, which is a commercial computer program designed to deliberately delete transactions from the POS system to create fraudulent sales records.  From approximately 2013 to 2020, Chen and others who worked at the restaurants deleted cash transactions with the intent to reduce the gross receipts and the amount of sales tax collected reported by the POS.  As a result, Chen intentionally suppressed the restaurants’ taxable income that he disclosed to his accountant who prepared his and his restaurants’ income tax returns.

Chen was also responsible for the accounting and financial records at the restaurants, for the collection and withholding of employment taxes for the restaurants at which he worked, and for signing the restaurants’ tax returns.  For the 2013 through 2020 tax years, Chen failed to withhold, account for, and pay to the IRS federal income taxes, Federal Insurance Contributions Act taxes (“FICA”), and federal unemployment taxes for multiple employees that he paid, or that he knew were paid, in cash.

The tax loss attributable to Chen’s criminal conduct is $2,092,926.94.  To date, Chen has paid $600,000 in restitution.

On July 29, 2022, Chen pleaded guilty to two counts of filing a false tax return.

Chen is required to report to prison on April 5.

This matter was investigated by the Internal Revenue Service – Criminal Investigation Division.  The case was prosecuted by Assistant U.S. Attorney David T. Huang.

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