Minn. Restaurant Owner Pleads Guilty To $420K Tax Fraud Scheme

MINNEAPOLIS (WCCO) -- A 33-year-old man has pleaded guilty to a $420,000 tax scheme involving two restaurants he owns in Big Lake and St. Michael, the United States Attorney's Office announced Wednesday.

On Aug. 21, Dexi Zheng specifically pleaded guilty to filing a false federal income tax return. He was charged with the felony on July 6, 2015.

According to his guilty plea and documents filed in court, Zheng avoided paying taxes on the full amount of the two restaurants' revenue in at least two ways. The first method was intentionally failing to deposit any of the cash receipts into the restaurants' bank accounts and failed to report the cash receipts to his Schedule C. Secondly, Zheng also recruited his father to act as a nominee and include the profits from the St. Michael restaurant on his father's income tax returns even though he wasn't the actual owner of the restaurant. In doing so, Zheng caused his father to exclude the restaurant's cash receipts from his Schedule C.

The total loss caused by Zheng is approximately $420,000.

"Individuals who corruptly violate the tax law to further their business interests and intentionally falsify their tax returns undermine public confidence in our tax system and unfairly disadvantage businesses that play by the rules," stated Special Agent in Charge Shea Jones of the IRS Criminal Investigation Division. "The IRS Criminal Investigation Division, together with the U.S. Attorney's Office, will investigate and prosecute those who violate our tax system."

Zheng faces up to three years in prison. His sentencing date has yet to be determined.