B.C. firm named in tax scam

Restaurants used device to reduce sales

Tucked into a strip mall in suburban Bellevue, Wash., Facing East Restaurant is known for its authentic Taiwanese food, homey decor and frequently “insane” waits for a table.

It is also ground zero for investigations that this month revealed millions of dollars in alleged tax evasion across numerous businesses — all made possible by a Canadian computer company’s devious export.

A salesman who distributed “sales-suppression” software allegedly made by British Columbia’s Profitek — enabling Facing East and other restaurants to electronically reduce revenue figures and thus pay far less tax — is to be sentenced in February on fraud and other charges.

After pleading guilty last week, John Yin, 66, faces up to 25 years in prison. The products he sold — also called “zappers” — allegedly enabled eight Seattle-area restaurants to evade US$3.4 million in taxes.

“I would hope that they’re going after the folks who profited from this — the restaurant owners and the company that actually made the software,” Yin’s lawyer, Kirk Davis, said.

The U.S. Attorney’s office in Seattle says other charges are likely in the U.S., noting that Profitek has developed a “growing distribution system” across North America.

Profitek’s main business is selling legal point-of-sale systems that record restaurant and retail sales electronically for tax and accounting purposes. American authorities allege that it also marketed zappers — USB devices that let businesses make their cash sales appear smaller to tax collectors.

Pius Chan, the Richmond, B.C. firm’s president, could not be reached for comment.

The company was found guilty of fraud here in 2013 over its distribution of the software.

But the conviction was overturned, the B.C. Court of Appeal saying there was nothing in the law that prevented the business from simply selling the devices. That loophole was seemingly eliminated in 2014, when new federal legislation made it illegal to use, develop or sell sales-suppression programs.

Washington officials carrying out a routine audit of Facing East at first just noticed strange anomalies in the restaurant’s bookkeeping.

Owner Yu-Ling Wong finally admitted to having used a Profitek zapper for years, and showed the auditors how it worked, according to an affidavit filed by investigator Lisa Gilman.

Wong inserted a USB thumb drive with the suppression software into the point-of-sales computer at the end of each month — sometimes calling on Yin to help, the document said.

“After insertion, a pop-up window prompted her to select how much in cash sales were to be reported for each day,” said the affidavit.