Former Snohomish Co. restaurant owner found guilty of tax fraud

Dec 19, 2023, 1:19 PM | Updated: 4:44 pm

restaurant tax fraud...

A view of a tray of sushi being served. (Photo: Dia Dipasupil/Getty Images)

(Photo: Dia Dipasupil/Getty Images)

A former owner of two Snohomish County restaurants — Oshima Sushi in Everett and Si Joy Sushi in Lynnwood — was sentenced today to 10 months in prison for tax evasion in U.S. District Court in Seattle, acting U.S. Attorney Tessa M. Gorman announced.

The former restaurant owner, Si Yong Kim, failed to pay taxes on more than $1.7 million in income at the two sushi restaurants. At the sentencing hearing, it was discovered that Kim had taken Paycheck Protection Program (PPP) loans during the COVID-19 pandemic. PPP loans were authorized during the pandemic to businesses as Small Business Administration-backed loans to help businesses keep their workforce employed during the COVID-19 crisis.

More on PPP fraud in WA: Tacoma Baking Co. owner found guilty of $350K COVID-19 loan fraud

“Here is a man who is withholding his taxes to the treasury but is perfectly willing to take taxes from the treasury to keep his businesses afloat. It is highly troublesome that this went on for an extensive period of time,” U.S. District Judge James L. Robart said.

Kim underreported the income at his restaurants by more than $1.7 million from 2016 to 2020, according to the Department of Justice. The investigation found Kim periodically deposited cash earned by his restaurants into his personal bank account. DOJ even found untaxed revenue from the restaurants in his home. He reportedly paid his employees in cash and overestimated the costs associated with the two restaurants.

When law enforcement executed a search warrant at Kim’s Mukilteo home and at his businesses in June 2022, they discovered he kept handwritten books documenting the actual gross income and legitimate expenses for his restaurants. In the bookkeeping, Kim noted a separate figure — a “CPA number” — that he provided to his accountant for tax purposes. The CPA number omitted the cash receipts for his restaurants and understated credit card charges as well.

The search also revealed an extensive collection of designer goods, large amounts of cash and records that indicated employees were paid under the table, according to the Department of Justice. Kim also used the proceeds from his scheme to invest in properties in Georgia and to pay off his home mortgage.

“Our tax system operates on an honor system where we expect our taxpayers to pay their fair share,” Gorman said in a prepared statement. “In this case, Mr. Kim didn’t cheat to keep his restaurants afloat, rather he used the money that should have gone to taxes for expensive watches, designer shoes and accessories, and jewelry. He used the money for investments and to pay off the mortgage on his home in Mukilteo. That conduct is an affront to all who scrimp and struggle to pay their fair share.”

“He had cash stashed throughout his home, drives luxury cars and proudly displays Rolex watches in a locked case,” Assistant U.S. Attorney Lauren Watts Staniar said. “This is not a circumstance in which a struggling business owner underreported income to keep the lights on. Kim had the means to pay his taxes, he just chose not to.”

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An analysis by the Internal Revenue Service (IRS) Criminal Investigation revealed that in each calendar year from 2016 to 2020, Kim failed to report his actual income for each restaurant. In 2017, he failed to report more than $586,395 in income. Kim has paid restitution of $511,750, according to the Department of Justice.

Kim’s lawyer also stated Kim sold the sushi restaurant in Everett.

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Former Snohomish Co. restaurant owner found guilty of tax fraud