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Press Release

Mother And Son Sentenced To Prison For Fraudulent Corporate Tax Returns

For Immediate Release
U.S. Attorney's Office, Northern District of California
Defendants Cheated IRS out of Approximately $500,000

SAN FRANCISCO –Howard Hsu was sentenced to 33 months in prison and his mother, Tracy Chang, was sentenced to 12 months and a day in prison today following their convictions on tax fraud charges, announced U.S. Attorney Brian J. Stretch and Acting Deputy Assistant Attorney General Stuart M. Goldberg of the Justice Department’s Tax Division.  The sentences were handed down by the Honorable William H. Orrick, U.S. District Judge, following a one-week trial at the conclusion of which a jury found the defendants guilty of conspiring to file fraudulent corporate income tax returns, filing false tax returns, and aiding the preparation of false tax returns. 

According to the evidence presented at trial, Hsu, 36, owned and operated Didsee Corporation (Didsee), a business incorporated in Nevada, that provided advertisement marketing services to online websites and marketplaces.  Chang, 65, was Disdee’s bookkeeper and listed as the President, Secretary, Treasurer, and Director.  Chang opened bank accounts for the business, transferred money between accounts, signed the company’s tax returns, and paid Didsee’s bills.

“Today’s sentences are a cogent reminder to all business owners that the obligation to faithfully pay taxes amounts to more than a simple duty to be fair and honest,” said U.S. Attorney Stretch.  “It is a legal obligation that, if flouted, can land you in prison.”

“Every taxpayer is required to file accurate returns and to pay their fair share,” said Acting Deputy Assistant Attorney General Goldberg.  “Mr. Hsu ignored that responsibility, and with today’s prison sentence is held fully to account for deducting personal expenses as business expenses and filing false returns.”

“We want everyone who files a tax return to take advantage of the deductions and credits to which they are entitled by law, however, no one is entitled to defraud the United States and the American taxpayers,” said Special Agent in Charge Michael T. Batdorf of IRS Criminal Investigation (CI).   “After paying a large tax bill, Tracy Chang and her son, Howard Hsu endeavored to virtually eliminate any future tax due from their company, Didsee Corporation. Those who file accurate, honest and timely returns can be assured that the government will hold accountable those who don’t. IRS-CI and the Department of Justice will investigate and prosecute those who violate our tax system.”
The evidence at trial established that Hsu and Chang conspired together to file fraudulent 2008 through 2009 corporate income tax returns, and an amended 2007 corporate tax return, cheating the Internal Revenue Service (IRS) out of approximately $500,000.  Hsu provided false summaries to Didsee’s return preparers, which claimed business expenses that were not incurred and included Hsu’s personal expenses.  Chang signed the fraudulent returns as Didsee’s President.    On January 29, 2015, a federal grand jury indicted Hsu and Chang; the indictment charged Chang with two counts of making and subscribing false tax returns, in violation of 26 U.S.C. § 7206(1); Hsu with three counts of aiding and assisting the preparation of false tax returns, in violation of 26 U.S.C. § 7206(2); and both defendants with conspiracy to defraud the United States, in violation of 18 U.S.C. § 371.  One of the aiding and assisting charges against Chang was dismissed before trial and on February 13, 2017, the jury found defendants guilty on all of the remaining charges.
In addition to the prison terms, Judge Orrick ordered Hsu and Chang both to serve three years of supervised release, to pay restitution to the IRS in the amount of $396,306, and to pay costs of prosecution in the amount of $8,570.95. Further, Judge Orrick ordered Hsu to pay a fine of $75,000 and Chang to pay a fine of $7,500.  Judge Orrick ordered the defendants to surrender on or before August 1, 2017, to begin serving their sentence.
Assistant U.S. Attorney Colin Sampson and Trial Attorney Matthew J. Kluge of the Tax Division, who prosecuted the case.  Acting Deputy Assistant Attorney General Goldberg and U.S. Attorney Stretch thanked special agents of IRS–Criminal Investigation who conducted the investigation.

Updated May 30, 2017