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Wednesday, November 19, 2014

Happy's Pizza Founder Convicted of Multi-Million Dollar Tax Fraud Scheme

Scheme Involved Restaurants in Michigan, Ohio and Illinois

On November 19, in the U.S. District Court for the Eastern District of Michigan, a federal jury after deliberating 4.5 hours convicted the president and founder of Happy’s Pizza of conspiracy to defraud the United States and 32 counts of tax crimes, the Justice Department announced today.

Happy Asker’s convictions include three counts of filing false federal individual tax returns for the years 2006 through 2008, 28 counts of aiding and assisting the filing of false federal income and payroll tax returns for several Happy’s Pizza Franchises restaurants for the years 2006 through 2009, and one count of engaging in a corrupt endeavor to obstruct and impede the administration of the Internal Revenue Code. 

During trial, the evidence established that Asker was the president, founder and public face of the Farmington Hills, Michigan, based Happy’s Pizza franchise.  He also had ownership interests in several Happy’s Pizza franchises located in Michigan, Ohio and Chicago.  From June 2004 through April 2011, Asker, along with certain franchise owners and employees, executed a systematic and pervasive tax fraud scheme to defraud the Internal Revenue Service (IRS).  Gross sales and payroll amounts were substantially underreported to the IRS on numerous individual corporate income tax returns and payroll tax returns submitted for nearly all 60 Happy’s Pizza franchise restaurants located in Michigan, Ohio and Illinois.  Evidence admitted at trial established that from 2008 to 2010, more than $6.1 million in cash gross receipts were diverted from approximately 35 different Happy’s Pizza stores in the Detroit area, Illinois and Ohio.  In total, the evidence at trial established that Asker and certain employees and franchise owners failed to report to the IRS approximately $3.84 million of gross income from the various Happy’s Pizza franchises and approximately $2.39 million in payroll.  The evidence at trial further established that a portion of this unreported income was shared among most of the franchise owners, including Asker, in a weekly cash “profit split.”  The cash was distributed among the investors and managers of the relevant franchises.  The IRS is owed more than $6.2 million in taxes as a result of this fraud scheme.

The evidence at the two-week trial also established that Asker purposely misled IRS-Criminal Investigation special agents during voluntary interviews conducted on Nov. 5, 2010, and Dec. 1, 2010.  Asker denied knowing co-defendant Arkan Summa, a convicted felon, and did not disclose Summa’s association with a number of Happy’s Pizza franchise restaurants.  Documents admitted during trial indicate Summa shared in diverted gross receipts from at least one Happy’s Pizza franchise in Toledo, Ohio.

Four other defendants in the case pleaded guilty prior to Asker’s trial.  On October 23, Maher Bashi, who served as Happy’s Pizza’s corporate chief operating officer, and Tom Yaldo, an owner of numerous Happy’s Pizza franchises, pleaded guilty to conspiracy to defraud the United States.  According to the indictment, their conduct included, among other things, creating and maintaining fraudulent accounting records and falsely reporting income taxes and payroll taxes.  On July 15, Summa pleaded guilty to engaging in a corrupt endeavor to obstruct and impede the due administration of the IRS, and Tagrid Summa, who is identified as a Happy’s Pizza franchise owner in documents admitted during trial, pleaded guilty to providing false documents to the IRS.

At sentencing, Happy Asker faces a statutory maximum sentence of five years in prison and a $250,000 fine for conspiracy to defraud the government.  The charges of filing a false income tax return and aiding or assisting in filing a false return carry a statutory maximum sentence of three years in prison and a fine of $250,000 for each count.  The obstruction charge carries a statutory maximum sentence of three years in prison and a fine of $250,000.  Asker’s sentencing is scheduled for March 5, 2015, in the Eastern District of Michigan. 

The case was investigated by special agents from IRS-Criminal Investigation and the Drug Enforcement Agency.  Senior Litigation Counsel Corey Smith and Trial Attorney Mark McDonald for the Justice Department’s Tax Division prosecuted the case. 

Updated November 19, 2014