On August 12th, 2020

Los Angeles Restaurant Owner Pleads Guilty in Tax and Insurance Fraud Scheme Investigated by California special agents and investigators

SACRAMENTO – On August 11, 2020, Los Angeles restaurant owner Gary Cheung pleaded guilty to felony charges involving tax evasion and insurance fraud related to the Sam Woo restaurants he owned and operated in Los Angeles County. He pleaded guilty to multiple felonies for which he will be sentenced to prison and be required to pay restitution in the amount of $2,964,375.93.

“This seven-year scheme that took money away from the state of California was investigated by investigators and special agents employed by the state,” said California Statewide Law Enforcement Association (CSLEA) President Alan Barcelona.  “They work on a team that targets those who skip out on paying taxes and insurance, which impacts all of us in the services the state is able to provide its citizens.”

“For his egregious crimes, Gary Cheung will pay nearly $3 million in restitution and face prison time,” said California Attorney General Xavier Becerra. “Tax fraud hurts taxpayers and the state’s ability to provide vital public services to our communities. Moreover, insurance fraud leads to higher insurance premiums and may impact workers who are legitimately injured on the job. The California Department of Justice will enforce our laws and make sure those who cheat taxpayers, and those who engage in conduct that impacts an injured worker’s ability to receive benefits, will face the consequences.” 

Cheung ran a fraudulent tax and workers’ compensation insurance scheme from January 2012 to March 2019, in which he failed to report or underreported:

  • Over $16 million in sales to the Department of Tax and Fee Administration;
  • Over $14 million in taxable income to the Franchise Tax Board;
  • Over $2.1 million in wages to the Employment Development Department; and
  • Over $2.1 million in wages to insurance carriers;

Cheung also evaded payment of $2,414,769.93 in sales tax, income tax, and payroll tax; and $549,606 in workers’ compensation insurance premiums.

Cheung pleaded guilty to felonies including:

  • filing a false sales tax return in violation of the Revenue and Taxation Code,
  • failure to pay payroll taxes in violation of the Unemployment Insurance Code,
  • and filing a false income tax return in violation of the Revenue and Taxation Code.

He also admitted to the white-collar enhancement.

The investigation into Cheung’s scheme was done by members of the Tax Recovery in the Underground Economy (TRUE) Task Force. As a result of their investigation, Cheung will serve no less than three years in prison if he pays restitution or nine years and four months in prison if he fails to pay the full agreed upon amount of $2,964,375.93. Cheung will be formally sentenced in August 2021.

The TRUE task force was created to ensure multi-agency collaboration and to combat wage theft, tax evasion, and other crimes in the underground economy. The task force consists of attorneys, investigators, and special agents from the Department of Justice, the Department of Tax and Fee Administration, the Franchise Tax Board, and the Employment Development Department.

A copy of the complaint is available here.

 

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