'Tax-Zapping' Evanston Restaurant Owner Hid Sales For Years: Feds

EVANSTON, IL — A federal grand jury last week indicted the owner of a Chinese restaurant in Evanston on six 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.

Quan Shun Chen, the owner of Hunan Spring, dodged taxes by underreporting revenue from the restaurant for the fiscal years 2012 to 2015 and calendar years 2015 and 2016, according to federal prosecutors.

Most recently, the 43-year-old Chicago resident last November reported gross receipts of $995,498 for the restaurant at Southpoint Plaza at 635 Chicago Ave.

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 Shuli Zhao, 59, of Westmont, the owner of Katy’s Dumpling House in Westmont; Chun Xu Zhang, 42, of Aurora, who owns Sushi City in Downers Grove; 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.

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