Prosecutors say the two Plymouth residents, who own two sushi and hibachi restaurants in the west metro, are facing 46 tax evasion counts in a “extensive scam” that lasted “years.”
These company owners, according to the Hennepin County Attorney’s Office, devised a complex plan to underrepresent their revenue and focus their sales tax returns on such false figures. Su Qian, 43, also known as “Audrey,” and Xu Sheng Wang, 45, also known as “Jacky,” were indicted with 16 counts and 14 counts of tax evasion, individually, after a two-year probe by the Minnesota Department of Revenue. Qian is also charged with two counts of tax evasion including the use of an electronic sales suppressing system.
Raku Sushi & Lounge in St. Louis Park, one of their licensed restaurants, was cited with 14 further counts of failing to pay or raise sales taxes.
In a quote, Hennepin County Attorney Mike Freeman said, “We hope to show that this was an extremely elaborate scam that ran for several years and cost the state more than $200,000 in tax revenue.” “The revenue agency’s detectives did an outstanding job of undertaking a lengthy, complicated probe, and these offenses took place prior to the pandemic during a period of strong economic growth.”
Investigators started looking into Qian, Wang, and their St. Louis Park restaurant, as well as another Raku restaurant they owned in Edina, in March 2018, after a Department of Revenue investigation found evidence of possible “illegal sale obstruction” conduct, according to the charging documents. Detectives looked at regular revenue records for the St. Louis Park site from January 2016 to May 2017 that were presented to auditors. There were no cash payments into the two restaurants’ checking accounts according to bank reports, but there were deductions totaling $566,000 in 2016 and $500,000 in 2017. According to the lawsuit, Qian and Wang were responsible for the majority of the withdrawals.
Additionally, prosecutors secured records from the two restaurants’ merchant systems. To calculate predicted cash profits and amounts, those documents were related to the companies’ real recorded sales. The Raku figures proved to be much smaller as compared to the Minnesota audit criteria for cash transactions.
On the 17th of July, 2018, search warrants were served at Wang and Qian’s homes as well as the two restaurants in query. Detectives discovered two USB drives in Qian’s bag, one of which housed a software called “Happy World.exe,” which can be used to erase and change sales documents. As per the complaint, police seized regular sales records for both businesses as well as a journal with the words “Happy World” printed on one side and instructions to remove chosen orders and rearrange order numbers.
The documents discovered in Qian’s home and restaurants were linked to documents given to the department during an audit. A review between the two sets of financial statements showed inconsistencies. According to the suit, from March 2016 to May 2017, the company’s reports showed under-reporting ranging from $658 to $25,500 a month (with the exception of January 2017).
The point of sale devices in each of the restaurants have offered more information on the program, according to the police. Orders may be canceled legally. For example, if a customer orders food from courier service, the order is inserted into the point of service system so that the kitchen can begin cooking the meal. Since the food distribution firm pays at a later date, the orders may be canceled. A ticket is canceled when it is voted down, but the order line object in the server persists.
However, a revenue suppressing system such as “Happy World” allows the customer to uninstall whole line items and purchases, as well as reorder tickets and line items to mask the indication of removal.
According to the attorney’s office, documents show that the restaurants underpaid income taxes by almost $240,000 over a 15-month span. Interviews with restaurant staff showed that Qian and Wang were in charge of the point-of-sale computers, and Qian was also in charge of the financial statements.
