St. Paul Staffing Agency Owners Sentenced for Tax Evasion Scheme

MINNEAPOLIS – The last of three defendants has been sentenced in connection with a multi-year tax evasion scheme in which the operators of two St. Paul employment agencies conspired to evade more than $1 million in federal employment taxes, announced U.S. Attorney Andrew M. Luger.

U.S. District Judge Patrick J. Schiltz sentenced Julian Xiong, 59, of Brooklyn Park, to a year of probation with six months in home detention and $409,340 in restitution to the Internal Revenue Service.

On May 24, 2022, Chong Xiong, 60, of Minneapolis, was sentenced to two years in prison followed by a year of supervised release and ordered $877,820 in restitution to the IRS. On June 17, 2021, Andrew Xiong, 59, of Ramsey, was sentenced to one year and one day in prison followed by a year of supervised release and restitution of $686,079 to the IRS. Andrew Xiong and Julian Xiong had previously pleaded guilty to tax evasion and Chong Xiong pleaded guilty to conspiracy to defraud the United States.

According to court documents, between 2012 and 2017, Chong Xiong operated a temporary staffing agency in St. Paul with his brothers Julian Xiong and Andrew Xiong. The Xiong brothers’ agency operated under the names Twinstar Solutions, Hope Solutions, and Step Staffing. The defendants contracted with local companies to supply workers. The agreement provided that the defendants’ business was the employer of the workers and responsible for compliance with tax laws relating to withholding, reporting, and payment of payroll taxes. Like all employers, the Xiong brothers’ staffing agency was required to withhold federal income taxes, social security, and Medicare taxes from workers’ pay and report the amounts and pay the withholdings over to the IRS. Instead of accurately withholding and paying over the correct taxes to the government, the defendants paid some of their employees in cash and kept the tax withholdings for themselves. They also submitted false payroll reports to the IRS, while paying only a fraction of the true employment taxes owed.

Chong Xiong and Julian Xiong committed the evasion while running the business under the Twinstar name until 2013 when Julian Xiong opened an employment agency in Roseville to serve one of Twinstar’s clients and continued a similar fraud. The original company was then renamed Hope Solutions and operated by Andrew Xiong and Chong Xiong. In 2016, Andrew Xiong left the conspiracy, and Chong Xiong renamed the business Step Staffing until the business closed a few months later.

In addition to falsely reporting and underpaying payroll taxes, the defendants caused the business to file false annual corporate tax returns and use multiple bank accounts to hide the scheme. The defendants essentially split the profits from the tax fraud by keeping cash for themselves. Chong Xiong admitted to purchasing a Mercedes-Benz with more than $28,000 in $100 bills.

In sentencing him to the lengthiest term, Judge Schiltz noted that Chong Xiong was the last to accept responsibility and plead guilty and was responsible for the greatest tax loss and was the longest participant and supervisor of the scheme.

This case is the result of an investigation conducted by the Internal Revenue Service – Criminal Investigations Division.

Assistant U.S. Attorney Robert M. Lewis prosecuted the cases.