Beltsville Business Owner Pleads Guilty To Evading over $522,000 in Federal and State Taxes
Failed to Report Over $1.8 Million in Revenues Deposited in Overseas Accounts
Baltimore, Maryland - Bae Soo “Chris” Chon, age 49, of Beltsville, Maryland pleaded guilty today to income tax evasion.
The guilty plea was announced by United States Attorney for the District of Maryland Rod J. Rosenstein and Special Agent in Charge Rick A. Raven of the Internal Revenue Service - Criminal Investigation, Washington, D.C. Field Office.
“Hiding income and assets offshore is not tax planning; it's tax evasion," said Rick A. Raven, Special Agent in Charge, IRS Criminal Investigation, Washington DC Field Office. “IRS will continue our ongoing efforts to pursue hidden offshore assets -- no matter where they are located. Through our efforts, we are gaining access to more and more information on institutions and individuals involved in offshore tax evasion, and you can expect us to use all of our enforcement tools to stop this abuse.”
According to his plea agreement, Chon owned and operated Mirage Cosmetics, Inc., which manufactured cosmetics products at its facility on Tucker Street in Beltsville. Mirage marketed its products domestically through Walgreens, Target, Costco and other chain stores, as well as in Canada, Australia, United Kingdom, Australia, Estonia, Dubai, Kuwait, Lebanon, South Africa, Germany, Japan, New Zealand, China and Vietnam. As a subchapter S corporation, the net profits Mirage earned were required to be reported as taxable income by Chon.
In the fall of 2008, Chon started a tax evasion scheme whereby he caused the proceeds from Mirage’s transactions with many of its foreign distributors to be diverted into foreign bank accounts in Hong Kong and Seoul, South Korea. The funds deposited into these foreign accounts were not reflected on Mirage’s official records. Accordingly, Chon substantially understated Mirage’s income on his 2008 and 2009 personal income tax returns.
On March 23, 2009, the IRS announced the agency’s Overseas Voluntary Disclosure Program, which offered taxpayers who maintained previously undisclosed foreign bank accounts incentives to disclose those accounts and bring themselves into compliance with the law. This highly-publicized program remained open until October 15, 2009, and nearly 15,000 taxpayers took advantage of it to make voluntary disclosures about foreign bank accounts in more than 60 foreign countries. Chon did not disclose the existence of his foreign bank accounts under this program.
On November 16, 2010, IRS agents executed a search warrant at Mirage’s offices. Thereafter, Chon timely filed his 2010 federal and state personal and corporate tax returns, in which he reported the amounts that had been deposited in the overseas bank accounts during the 2010 tax year. Chon paid the tax due for the tax year 2010.
As a result of the scheme, approximately $1,818,895 in revenues from Mirage’s foreign clients that were diverted into the overseas bank accounts resulted in understating Chon’s federal and state tax liability by $522,649.70 for the tax years 2008 and 2009.
Chon has agreed to pay $412,404 in restitution to the IRS for federal taxes owed for the tax years 2008 and 2009, plus penalties and interest. Chon tendered two checks to the IRS on September 11, 2012 for $111,069.72 and $679,775.78, reflecting the agreed restitution and his counsel’s calculation of the amount of the applicable interest and penalties, for the tax years 2008 and 2009 respectively.
Additionally, in order to resolve his civil liability for failing to file reports of Foreign Bank and Financial Accounts, Chon will be required to pay as an additional penalty, 50% of the highest aggregate balance in the overseas bank accounts for the calendar year 2009, prior to his sentencing in this case.
Chon faces a maximum sentence of five years in prison and a $100,000 fine. U.S. District Judge William D. Quarles, Jr. scheduled sentencing for February 14, 2013 at 1:00 p.m.
United States Attorney Rod J. Rosenstein praised the IRS Criminal Investigation for its work in the investigation and thanked Assistant U.S. Attorney Jefferson M. Gray, who is prosecuting the case.