On October 8th, 2020

Restaurant Co-Owner Pays $2.3 Million in Restitution for LA-Area Tax and Insurance Fraud Scheme A TRUE task force investigation

SACRAMENTO – On October 8, 2020, California Attorney General Xavier Becerra announced the arraignment and plea of Thomas Cheung for a nearly eight-year long tax fraud scheme connected to six Los Angeles-area Sam Woo restaurants which he owned along with his brother Gary.

Thomas Cheung paid $2,353,058.32 prior to his arraignment and is expected to be sentenced to 16 months in prison in January 2021, in accordance with the terms of his plea agreement.

Gary Cheung was arraigned and pleaded guilty to multiple felonies related to the scheme in August. To date, Gary Cheung has paid $549,606 of his required $2,964,375.93 in restitution and is expected to be sentenced to prison in August 2021.

“This was a state investigation involving numerous departments into business owners who had no respect for tax laws that help generate money for services and to run our state,” said California Statewide Law Enforcement Association (CSLEA) President Alan Barcelona.  “The task force that conducted this investigation is an integral part of rooting out tax evaders and cheats and bringing them to justice.”

An investigation by the multi-agency Tax Recovery in the Underground Economy (TRUE) Task Force uncovered that Thomas Cheung ran a fraudulent tax scheme from December 2011 to March 2019, in which he evaded $397,145 in workers’ compensation insurance premiums and $1,364,538.53 in sales, income, and payroll taxes. The scheme unfolded when investigators discovered he failed to report sales and wages to the following agencies and insurance carriers for multiple Sam Woo restaurants he owned:

  • Over $7.6 million in sales to the California Department of Tax and Fee Administration;
  • Over $3.5 million in taxable income to the California Franchise Tax Board;
  • Over $4.5 million in wages to the California Employment Development Department; and
  • Over $4.5 million in wages to insurance carriers.

Thomas Cheung pleaded guilty to multiple felonies, including filing a false sales tax return and filing a false income tax return in violation of the Revenue and Taxation Code. He also failed to pay payroll taxes in violation of the Unemployment Insurance Code.

“On the heels of his brother Gary, Thomas Cheung paid restitution and will spend time in prison for the crimes he committed,” said Attorney General Becerra. “Avoiding payment of workers’ compensation premiums hurts workers and failing to report taxable income and sales hurts honest taxpayers and the state’s ability to fund public services for our communities. The TRUE Taskforce’s investigation and subsequent prosecution of the Cheung brothers is a win for Californians.”

The TRUE Taskforce 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 California Department of Justice, the California Department of Tax and Fee Administration, the California Franchise Tax Board, and the California Employment Development Department.

A copy of the complaint is available here.

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