Serving Up Fraud for Dinner

6
40933904 - hand of woman using payment terminal in an electrical shop, paying with credit card, credit card reader, finance concept

Restaurant customers love to peruse menus for tasty meals that will satisfy their hankerings. (Whether a blue plate special or a gourmet dish, they expect to have a tasty experience no matter how much they pay.) Customers understand that there are additional costs associated with the meal that include a tip for the waiter or waitress and taxes; however, patrons eating at one Illinois restaurant didn’t expect to indirectly contribute to a scheme that defrauded the Internal Revenue Service (IRS). (That would definitely leave a bad taste in your mouth.)

An article published by KMOV.com details how two brothers, who owned and operated a restaurant together, altered information in their cash register system so they could pay less in taxes to the federal government. For nearly five years, the brothers lowered their reported cash sales, then removed that amount of cash from their register before depositing the money in their business bank account and compiling gross receipt reports. (It’s as if the money was never there.)This illegal act allowed the brotherly owners to lowball their restaurant’s income on their business federal tax return, decreasing the amount of tax owed to the IRS.

The 50- and 52-year-old brothers both pleaded guilty to federal tax obstruction. They were each sentenced to four years of probation for their illegal acts.They and their business paid restitution of $219,183.23 prior to their sentencing. (Perhaps the brothers were able to avoid prison time because they paid the IRS back. Wouldn’t it have been simpler to just pay the IRS in the first place?) The two defendants will also pay other penalties plus interest to the Illinois Department of Revenue.

Although these two business owners were serving up fraud in their restaurant, the government was quick to clear the table before they could finish their meal. Let’s hope this experience doesn’t leave these businessmen hungry for more fraud.

Source: Today’s ”Fraud of the Day” is based on an article entitled, ”Owners of Metro East restaurant sentenced for tax fraud,” posted on KMOV.com on July 22, 2016.

FAIRVIEW HEIGHTS, III. (KMOV.com) – Two Illinois business owners have been sentenced to four years probation each after trying to defraud the IRS.

Rodney Archer, 50, and Kenneth Archer, 52, are the owners of Lotawata Creek Inc., which does business as Lotawata Creek Southern Grill in Fairview Heights, Ill.

From 2010 through July 2015, the men and their company altered and manipulated information in their restaurant’s system to make it appear that the restaurant was reporting lower cash sales. They then removed the corresponding amount of cash from the business and reported it as gross receipts prior to deposit.

In turn, these manipulations lowered the total gross of their receipts reported on their tax returns, which lowered the taxable income reported to the IRS.

Read More

SHARE
Previous articleIs There a Fraudster Under the Bed?
Next articlePesky Fraudsters
Larry Benson
Larry Benson is currently the Director of Strategic Alliances for Revenue Discovery and Recovery at LexisNexis Risk Solutions. In this role, Benson is responsible for developing partnerships for the tax and revenue and child support enforcement verticals. He focuses on embedded companies that have a need for third-party analytics to enhance their current offerings.