Charleston Restaurant Owners Sentenced to Prison

Contact Person: Dean Secor (843) 727-4381

Columbia, South Carolina ---- United States Attorney Bill Nettles stated today that Dao Ping Lin (LIN), age 52, and Jin Xian Yang (YANG), age 52, both of Charleston, South Carolina were sentenced today in federal court in Charleston, South Carolina regarding the guilty pleas they entered on October 22, 2013.  United States District Judge Richard M. Gergel of Charleston sentenced LIN to one (1) year and a day in prison and three (3) years of supervised release for Willful Failure to Truthfully Collect and Pay over Withholding Taxes, a violation of 26 U.S.C. § 7202, and six (6) months in prison for Pattern or Practice of Hiring Illegal Aliens, in violation of 8 U.S.C §§1324a(a)(1)(A) and 1324a(f)(1).  LIN’s sentences are to run concurrently.  Judge Gergel sentenced YANG to eighteen (18) months in prison and 3 years of supervised release for Structuring Bank Transactions of $10,000 or less, in violation of 31 U.S.C §§ 5324(a)(3) and 5324(d)(2). 

Evidence presented at the change of plea hearing established that between February 2009 and March 2009, LIN and YANG, a married couple, purchased or caused to be purchased $85,885 of U.S. Postal Service money orders in increments totaling slightly less than the $3,000 reporting requirement for such instruments. The postal money order structuring activity led to a joint investigation by the Postal Inspection Service (USPIS) and the Internal Revenue Service-Criminal Investigation (IRS-CI).  The U.S. Immigration and Customs Enforcement (ICE) Homeland Security Investigations (HSI) joined the investigation after receiving information from an anonymous source that LIN was employing illegal aliens and paying such workers under the table.

Income taxes and Federal Insurance Contributions Act (FICA) taxes collected from employees are collectively known as “trust fund taxes” and must be reported on quarterly Employment tax returns (Forms 941). Employers are also required to pay over a matching portion of FICA taxes and report that on the Forms 941 as well. The employer’s matching portion of FICA taxes is not a “trust fund tax.” It is a direct tax. 26 U.S.C. § 7202 only applies to “trust fund taxes,” but the tax loss due to failure to truthfully account for and pay over the employer’s matching portion of FICA taxes can be considered as relevant conduct for sentencing purposes.

The joint investigation revealed that LIN has owned and operated Healthy Inc., d/b/a Osaka Restaurant in Charleston since 2006. Most of LIN’s employees were illegal aliens. Osaka’s payroll returns reported the wages paid by check to LIN’s family and other legal workers. The illegal aliens’ wages, all paid in cash, were not included on Forms 941. The investigation further revealed that LIN was the responsible party for collecting, truthfully accounting for, and paying over “trust fund taxes” for Osaka Restaurant.  For the 1st quarter 2007 through the 4th quarter 2010, LIN filed false Form 941s. The modus operandi was to only give the outside accountant payroll information related to the employees paid by check.  The unremitted “trust fund taxes” totaled $228,912, and the unpaid employer taxes totaled $46,512. As for the guilty plea tax count (4th Quarter 2010), LIN underreported wages in the amount of $38,000, which resulted in unpaid “trust fund taxes” of $14,307.

The illegal aliens employed by Osaka Restaurant lived in a house that LIN owned. LIN and Osaka Restaurant owned passenger vans used to transport the illegal aliens to and from the employee house and the restaurant.  After conducting surveillance and a traffic stop of an Osaka Restaurant van that contained illegal alien workers, search warrants were executed at LIN and YANG’s residence, the employee house, and Osaka Restaurant. Evidence seized during the searches included payroll sheets itemizing the amounts employees were paid by checks and the amounts employees were paid in cash. When agents searched the employee house they found two individuals on the premises. One individual had a pending asylum petition and the other individual was an illegal alien. Four additional illegal alien workers were found on the restaurant’s premises. ICE administratively arrested the five illegal aliens, who were later deported.

Agents also determined that YANG intentionally structured currency withdrawals in amounts of $10,000 or less (mostly in $9,800 increments) for the purpose of evading the filing of Currency Transaction Reports (CTRs). During the years 2007, 2008, and 2009, YANG conducted 102 structured cash withdrawal transactions totaling $999,600. She made the series of withdrawals from various branches of Bank of America, where the business bank account for LIN’s restaurant was maintained. YANG had signature authority of the account.

During the course of the joint investigation, agents seized $399,619 in currency from LIN and YANG as well as a 2008 Infinity automobile. LIN and JIN agreed to the forfeiture of those seized assets, and Judge Gergel entered an order of forfeiture for those assets at the sentencing hearing.

The case was investigated by agents of the U.S. Internal Revenue Service-Criminal Investigation (IRS-CI), the U.S. Immigration and Customs Enforcement (ICE) Homeland Security Investigations (HSI), and the U.S. Postal Inspection Service (USPIS).  Assistant United States Attorney Dean H. Secor of the Charleston office prosecuted the case.