On February 12th, 2021

Restaurant Owners Charged with Underreporting Millions of dollars in Sales and Evading Sales Tax State investigators conduct investigation into three restaurants

SACRAMENTO – On February 11, 2021, two siblings, Yan Lu and William Lu, were charged with allegedly under-reporting millions of dollars in sales and evading sales tax for the Mama Lu restaurants they own in Monterey Park. Both Yan Lu and William Lu pleaded not guilty in Los Angeles County Superior Court.

In 2018, investigators with the California Department of Tax and Fee Administration (CDTFA), Investigations Bureau began a sales tax evasion investigation on three restaurants:

  • Mama’s Lu Dumpling House Corp., HY Gourmet, Inc.,
  • Mama Lu Dumpling House Monterey Park, Inc.
  • and Mama Lu Dumpling House, Inc.

The investigation revealed, a ten-year scheme, starting in 2008 in which Yan and William allegedly under-reported more than $11 million in sales and evaded more than $1 million in state sales tax by falsifying monthly sales reports for their restaurants. An investigation by the California Franchise Tax Board (FTB) also revealed that by allegedly underreporting their sales, William and Yan evaded over $650,000 in state income tax.

“By putting state investigators from various departments on the same team to conduct investigations into the underground economy, the state of California benefits,” said California Statewide Law Enforcement Association (CSLEA) President Alan Barcelona.  “The investigators have their areas of expertise and each can draw upon that to examine alleged crimes and potential charges.”

In January, both William Lu and Yan Lu were charged with 17 counts, including conspiracy to file false sales tax returns, filing false sale tax returns, and filing false income tax returns.

Investigations were conducted by the CDTFA and the FTB. Both agencies are a part of the multi-agency Tax Recovery in the Underground Economy (TRUE) Task Force, which also includes the California Department of Justice (DOJ) and the California Employment Development Department.

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 member agencies.

There will always be consequences when you rip off California’s taxpayers,” said Attorney General Becerra. “Blatantly flouting the law in order to avoid paying taxes takes money away from California’s communities. Through the TRUE Task Force, the California Department of Justice works with other agencies to bring bad actors to account.”

A copy of the complaint is available here.

 

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