Attorney General James Secures $4.7 Million After Supermarket Chain Engaged in Three Schemes to Evade Taxes

 

NYC Supermarket Chain and Owner Evaded Employee

Withholding Tax, Income Tax, and Sales Tax

 New York Attorney General Letitia James today announced that her office has secured $4.7 million from a chain of supermarkets operating throughout New York City after they were caught committing three schemes to evade paying taxes. Today's agreement resolves claims that the chain — Food World — and its owner — Hi Jong “Howard” Lee — engaged in a series of fraudulent tax avoidance schemes by underreporting cash sales and paying workers off the books.

“My office has no tolerance for tax cheats who evade paying their fair share and leave others to foot the bill,” said Attorney General James. “Food World and its owner engaged in flagrant, multimillion-dollar schemes to defraud taxpayers and the state. This case should serve as a clear warning to all tax fraudsters that their attempts to cheat fellow citizens will be brought to light and will not go unpunished.”

The investigation commenced when a whistleblower filed a lawsuit under the qui tam provisions of the New York False Claims Act, which allows individuals to file civil actions on behalf of the government and receive a percentage of any recovery.

The investigation found that, from 2012 until 2018, Food World entities — including Pine Tree Meat & Produce Inc., Food Jungle, Inc., Sonamoo, Inc., and CNI Meat & Produce, Inc. — engaged in three separate schemes to underreport sales and income taxes and evade employee withholding tax obligations — all at the direction of Food World’s owner.

The first scheme involved the use of standalone cash registers attached to New York state lottery machines to record cash sales of non-lottery supermarket items. These lottery cash registers were used to conduct cash sales of groceries and other taxable goods without being recorded in the stores’ online sales system, and without being declared for income tax or sales tax purposes.

The second scheme involved underreporting sales by issuing fake merchandise returns. The owner, Lee, forced store managers at two Food World locations to generate fake return receipts, purportedly documenting the return of multiple items that were never actually returned. Food World employees then provided the withdrawn cash for the allegedly returned items to Lee, along with the fake return receipts.

The third scheme involved paying the majority of Food World employees in cash and off the books, in an effort to avoid thousands of dollars in withholding tax deductions every week. Food World and Lee paid less than half of their employees by payroll check — which would have included appropriate withholdings. Instead, Food World and Lee paid the majority of their employees in cash and off the books — allowing Food World to underreport thousands of dollars in wages each pay period and evade employer withholding taxes.