I-Team Investigation: Chinese Restaurant Fraud Hurts Small Businesses

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by Adam Walser

WHAS11.com

Posted on February 4, 2011 at 12:25 AM

Updated Friday, Feb 4 at 12:09 PM

(WHAS11) - Our I-Team has discovered Chinese restaurant owners who we have gone from state to state opening businesses, taking out cash, then closing them.

In some cases, they leave behind hundreds-of- thousands of dollars in debt.

When the owners of Long’s Chinese Buffet first moved from Kentucky to Tennessee, they were told they couldn't open. Nashville inspectors caught them using unlicensed contractors from New York to do all the renovation work.

So they contacted a local builder,who we'll call "Reggie", to help them out.

“I literally put them in business,” said Reggie.

Reggie says he worked for months to make sure electrical work, signage, HVAC and other systems complied with code.

Zu Chen, nicknamed ‘Tony’, his wife Jin H Liu, nicknamed ‘Gina’ and her sister Jin X Liu, who goes by ‘Sue’ are the owners.

“About halfway through it, they couldn't write checks anymore,” said Reggie. “So they asked me if I'd take a credit card. And it just so happens my company takes credit cards.”

Eventually, the renovations were approved by the city and the restaurant opened.

“The next thing I know the bank calls me, Bank of America and says ‘We're gonna have to debit your account $16,000, $17,000, $18,000 thousand dollars because these people disputed the work,’” said Reggie.

It was far from the only dispute involving the owners.

In Kentucky, liens totaling nearly $700,000 dollars have been filed by landlords, suppliers and banks against the business owners.

They opened a total of four restaurants in Kentuckiana in recent years, all of which were shut down by the state.

The Kentucky Department of Revenue says the group owes more than $88,000 in unpaid state taxes. Since then, they have opened three new restaurants in Tennessee.

“In my opinion, that's intentional,” said Mack Gillim, with the Kentucky Department of Revenue. “It got to the point where they made a conscious business decision to go into business, go out of business, and start another one. To prove that, you'd have to do a lot more in depth research.”

Gillim believes that while most businesses fail because of a poor economy or bad luck, some owners want them to fail.

“If they collect x number of dollars and get to keep the extra six percent in sales tax, that's additional profit for them, or money in their pockets,” said Gillim.

WHAS11 discovered a large number of Chinese restaurants in Kentucky and Tennessee have failed soon after opening or have changed names and operators multiple times.

In Tony's case, state records show he uses different names on different business documents, ppresumably, to hide his identity. That allows him and his partners to keep getting new money to open new businesses... $117,000 of your tax money came from the U.S. Small Business Administration.

“While you can judgmentally make an association, there's no automated way of doing it right now. We're working on it,” said Gillim.

When WHAS11 confronted Tony in Nashville, he told Adam he had the wrong guy.

“They know how to move money around and work the system,” said Reggie. “Why people don't catch up to them and let it happen is beyond me.”

Revenue officials say they are experimenting with new software to help them better identify cases of fraud or abuse.

This could assist them in pursuing criminal charges in the cases of the worst tax absconders.


 

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