'Tax-Zapping' Westmont, Downers Grove Restaurants Hid Sales: Feds

CHICAGO — A federal grand jury last week indicted the owner of restaurants in Westmont and Downer's Grove on charges they falsified 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.

Shuli Zhao, 59, of Westmont, the owner of Katy’s Dumpling House in Westmont and Chun Xu Zhang, 42, of Aurora, who owns Sushi City in Downers Grove and is also known as "Ray" were both charged Tuesday in U.S. District Court in Chicago, prosecutors said.

Zhao is accused of dodging taxes by underreporting gross receipts for calendar years 2013 to 2015, according to the the indictments, while Zhang intentionally falsified returns from 2012 to 2015.

The maximum penalty for each count of knowingly filing false tax returns carries a maximum sentence of three years in prison, prosecutors said. Zhao faces six counts and Zhang faces four.

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 three 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 and Israel Sanchez, 43, of Chicago, the owner of Cesar’s on Broadway on North Broadway in Chicago, 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.

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.”