SAN FRANCISCO – LAWFUEL – The Law News Network – The United States Attorney’s Office for the Northern District of California announced that David Min Chan, 39, pleaded guilty today to one count of tax evasion, in violation of 26 U.S.C. § 7201, and one count of making false statements to an executive branch of the government, in violation of 18 U.S.C. § 1001(a)(2) and (3). Mr. Chan, a resident of Hillsborough, California, was charged on both counts by information on August 3, 2005.
In the plea agreement, Mr. Chan admitted that during 1998 through 2000, he was the owner and operator of Spectrum Painting and Decorating located in Foster City, California, a licensed painting contractor. During this period, Mr. Chan made cash payments to some of his employees but failed to withhold social security and Medicare taxes on those cash payments. Mr. Chan also failed to report the cash payments on Forms 940 and 941 (payroll tax returns) filed by Spectrum in the years 1998-2000, and failed to pay over the social security and Medicare taxes that should have been withheld from the cash wages of these employees and the employer’s portion of such taxes due on the cash wages. He also failed to pay Federal Unemployment (FUTA) taxes due on these wages. He admitted that he failed to do all these things in order to avoid and evade the payment of employment taxes and to save on worker’s compensation insurance.
Mr. Chan further admitted that during 1999 and 2000, Spectrum was a subcontractor on a contract to construct subsidized housing in Oakland, California, managed by the Department of Housing and Urban Development (HUD), known as the “Acorn Project.” Under the terms of the contract, all contractors and subcontractors providing services or property to HUD on the Acorn Project were required to pay their employees the prevailing wage. He deliberately caused certified payroll and prevailing wage reports to be submitted to HUD that he knew falsely reported the number of hours worked at the project by employees of Spectrum and falsely certified that employees of Spectrum were being paid in accordance with prevailing wage requirements. He admitted that he knew these reports were false when he submitted them to HUD and knew that he was paying employees less than the prevailing wage in violation of the federal contract.
Simultaneous with entering his guilty plea, Mr. Chan also entered into a settlement agreement with the Department of Labor wherein Mr. Chan admitted that he failed to pay $189,614 in prevailing back wages and overtime prevailing wages to the employees of Spectrum, and agreed to pay this money to the employees through the Department of Labor. He further agreed that he and Spectrum would be debarred for a period of 3 years from working on any contracts subject to the prevailing wage requirements.
The maximum statutory penalties for both the tax evasion count, in violation of 26 U.S.C. § 7201, and the false statement count, in violation of 18 U.S.C. § 1001(a)(2) & (3), is 5 years in prison, 3 years of supervised release, a $250,000 fine, a $100 special assessment, and restitution as determined by the court. However, any sentence would be imposed by the court after consideration of the U.S. Sentencing Guidelines and the federal statute governing the imposition of a sentence, 18 U.S.C. § 3553.
The prosecution was the result of a lengthy investigation by IRS Criminal Investigation and the Wage and Hour Division of the Department of Labor. Emily Kingston is the Assistant U.S. Attorney who is prosecuting the case with the assistance of Kathy Tat, Kathy Terry and Stefania Chin.