DENVER – Jung Yoon Choi, age 55, formerly of Aurora, Colorado, pled guilty yesterday before U.S. District Court Judge Robert E. Blackburn to obstructing and impairing the laws of Internal Revenue Service, United States Attorney John Walsh and IRS Criminal Investigation Special Agent in Charge Stephen Boyd announced. Judge Blackburn is scheduled to sentence Choi on April 21, 2016. Choi agreed to be charged by an Information, waiving her Constitutional right to be indicted by a federal grand jury.
According to the information and plea agreement, from January 1, 2009, through December 31, 2010, Choi owned and operated three massage parlors in the Denver Metropolitan area, specifically; Ivy Spa located at 2260 S. Quebec Way, Denver, CO (during 2009); New Image Spa located at 17783 Cottonwood Drive, Parker, CO (during 2010); and Blue Pine Spa located at 6212 East Pine Lane, Douglas County, CO (during 2010).
Choi typically staffed each of her spas with an on-site manager and a number of workers who provided services to customers. The primary service provided by her workers was giving massages. Each of the spas typically had a fee schedule according to which customers paid a door fee ordinarily ranging from $40 to $50, depending on the amount of time requested (30 to 60 minutes were the norm).
In addition, customers at the various spas often paid an additional fee which was characterized as a “tip” in many instances for “extra services” provided by Choi’s workers. At times, the “extra services” consisted of prostitution services in violation of Colorado Revised Statute, 18-7-201. Specifically, the workers would engage in sexual acts with customers in exchange for money. Choi was aware that such illicit activity was occurring at times in each of her spas and that business income was being generated from such activity. Choi regularly advertised for her spas using Westword newspaper and Sowet.com. Choi paid the owner of Sowet.com a monthly fee to post favorable reviews on his website touting her various businesses and the women who worked there.
Choi generated substantial income from each of her spas for tax years 2009 to 2010. However, she failed to file personal income tax returns for 2009 and 2010, and thus she did not report her business income for either year and she did not pay any taxes to the IRS. In addition to not filing tax returns and not paying taxes, Choi further impeded the IRS’s collection of taxes by several means, including: using nominees on bank accounts so as to conceal her business income; conducting cash and business transactions using nominees; conducting financial transactions in amounts that were less than $10,000 so as not to trigger the filing of currency transaction reports; and hiding and storing income in the form of cash hoards at various locations.
IRS Special Agents conducted a financial analysis of the Ivy Spa bank account for 2009 and the account showed deposits totaling $118,418. The vast majority of such deposits, $106,322, came from credit card payments from customers at Ivy Spa. The $118,418 in funds deposited into this account represented gross income generated by Choi for tax year 2009.
Choi also utilized nominees to conduct financial transactions in bank accounts for New Image Spa and Blue Pine Spa in 2010. Choi received substantial business income from New Image and Blue Pine Spa throughout 2010 in the form of cash and credit card deposits which she concealed. She regularly took a portion of her cash earnings and secreted the funds in cash hoards at various locations. Particularly, on December 17, 2010, pursuant to a federal search warrant, IRS Special Agents seized approximately $118,575, in cash from a locker at the U-Store-It. In total, Special Agents seized $219,388 in cash from Choi or her associates in late 2010. Such funds represented gross, business income which Choi generated during 2010.
Choi agrees to the forfeiture of $118,575.00 seized on December 17, 2010. The forfeiture of Choi’s assets, including the $118,575.00 identified above, shall not be treated as satisfaction of any fine, restitution, cost of imprisonment, or any other penalty the court may impose.
Choi pled to one count of obstructing and impairing IRS laws which carries a penalty of not more than 3 years in federal prison, and a fine of up to $250,000 per count.
This case was investigated by Internal Revenue Service – Criminal Investigation with assistance from the Federal Bureau of Investigation and is being prosecuted by Assistant U.S. Attorney Tim R. Neff.