'Tax-Zapping' Aurora Man Hid Restaurant Sales Revenue: Feds

CHICAGO — A federal grand jury last week indicted an Aurora man who owns a sushi restaurant in Downer's Grove on charges four counts of falsifying tax returns, prosecutors said. Federal investigators have been focusing on sales suppression software and other ways that restaurants owners hide revenue by falsifying receipts, according to the U.S. Department of Justice. Such suppression software or devices, so-called "zappers", automatically delete and falsify sales data to make records of cash sales appear to match reported income.

Chun Xu Zhang, 42, of Aurora, who owns Sushi City in Downers Grove and is also known as "Ray", was charged Tuesday in U.S. District Court in Chicago, prosecutors said. He has been accused of dodging taxes by underreporting gross receipts for calendar years 2012 to 2015.

Zhang reported $1,161,998 in sales in April 2016, when he "knew that gross receipts substantially exceeded that amount," according to the indictment.

U.S. Attorney for the Northern District of Illinois John Lausch said in a release announcing the charges that recovering funds for the federal treasury was a top priority in his office.

“These charges send a clear message that restaurant owners who choose to illegally underreport gross receipts will be held accountable,” Lausch said.

Federal prosecutors also announced criminal charges against four other restaurant owners as part of the same investigation, which remains ongoing.

They include Quan Shun Chen, 43, of Chicago, the owner of Hunan Spring in Evanston; Sandra Sanchez, 44, a Morton Grove resident and the owner of Cesar’s Tacos on North Clark Street in Chicago; Israel Sanchez, 43, of Chicago, the owner of Cesar’s on Broadway on North Broadway in Chicago and Shuli Zhao, 59, of Westmont, the owner of Katy’s Dumpling House in Westmont, according to the U.S. attorney's office.

In a 2017 report from Bloomberg BNA, a tax law professor estimated states lose about $21 billion in tax revenue every year from the restaurant industry alone. Last August, Illinois Attorney General Lisa Madigan announced the first criminal charges under a 2013 state law of a restaurant owner accused of using a "zapper" in the case of Sanchez, the owner of Cesar's restaurant in the Lakeview neighborhood of Chicago.

The maximum penalty for each count of knowingly filing false tax returns carries a maximum sentence of three years in prison, prosecutors said.

Announcing the latest charges Thursday, the chief of the Internal Revenue Service's Chicago criminal investigative division warned anyone considering cheating on their taxes.

"This is only the beginning. I want to warn those restaurants, gas stations, convenience stores, and other establishments that are currently using or thinking of using sales suppression software, that we are on to you and your methods," Special Agent-in-Charge Gabriel Grchan. "If you steal from the federal government, there will be serious consequences.”