Two restaurant owners in the west metro purposely underreported sales and cheated the state out of nearly $240,000 in a long-running and "highly sophisticated scheme," according to the Hennepin County Attorney's Office.
Su "Audrey" Qian, 43, and Xu Sheng "Jacky" Wang, 45, both of Plymouth, were charged in District Court last week with 46 counts of tax fraud in connection with the scheme they perpetuated from Raku Sushi & Lounge in the West End retail district in St. Louis Park and Raku in Edina's 50th and France shopping district.
The state Department of Revenue's two-year investigation resulted in Qian being charged with 16 counts of tax fraud and Wang with 14 counts. As a business, the restaurant was charged with 14 counts of failure to pay or collect sales taxes. Qian faces two additional counts of using an automated sales suppression device to commit tax fraud.
The defendants' first court appearances are scheduled for May 24. They were charged by summons. A message was left for Qian, and her attorney was not immediately available to comment. Wang and his attorney declined to comment. Both restaurants continue to operate.
"We intend to prove that this was a highly sophisticated scheme that ran for many years which cost the state more than $200,000 in tax revenue," read a statement from County Attorney Mike Freeman.
"The use of sales suppression devices harms the vast majority of Minnesota restaurants that follow the law," said Revenue Commissioner Robert Doty in a statement. "Sales tax is a trust tax, and when a restaurant breaks that trust, the department will take action to make sure Minnesotans can have confidence that the tax laws are being applied and enforced fairly for all businesses."
According to the criminal complaints:
Investigators began looking into Qian, Wang and their restaurants in March 2018 after an audit by the Revenue Department uncovered signs of potential criminal sales suppression activity.
The investigators examined daily sales reports for the St. Louis Park restaurant that had been provided to auditors for January 2016 through May 2017. Investigators obtained and reviewed bank records for the restaurants showing no cash deposits into the checking accounts, but there were withdrawals including about $566,000 in 2016 and $500,000 in 2017. Most of the withdrawals were by Qian and Wang.
On July 17, 2018, law enforcement searched the homes of Wang and Qian and the two restaurants. In Qian's purse, investigators found two USB drives that contained a program called Happy World.exe, which can be used to delete and alter sales records. Investigators seized daily sales reports for both restaurants as well as a notebook that had "Happy World" written on one page followed by instructions to delete selected orders and rearrange order numbers.
Investigators compared the records found in Qian's home and restaurants to records provided to the department during an audit. They found discrepancies between the two sets of financial records. From all but one month from March 2016 to May 2017, company records showed an underreporting from between $658 to $25,500.
Interviews with restaurant employees revealed that the point of sale machines were primarily handled by Qian and Wang, and Qian was responsible for the monthly reports.
Paul Walsh • 612-673-4482