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Owners of California Restaurant Chain Arrested for Tax Fraud

Owners of the Chuy's Mesquite Broiler chain of restaurants in California and Arizona were arrested earlier this week, along with the company's accountant. Authorities have been investigating the three for some time due to tax fraud and illegal hiring practice allegations.

It's a scene that reads like it could have been written for a movie: the culmination of a lengthy investigation involving U.S. immigration and Customs Enforcement officers, the Internal Revenue Service and Homeland Security led to the simultaneous raid of multiple Chuy's locations in California and Arizona by federal agents Wednesday. The purpose of this well-orchestrated event was to collect physical evidence against the two company owners and their accountant. An arraignment occurred in U.S. District Court in Tucson the day after the mass-raid, where each of the three were brought before the court on 19 separate accounts which included conspiracy to defraud the IRS, tax evasion and harboring illegal immigrants. There are nine Chuy's locations in Southern California.

The indictment indicates Chuy's owners failed to report to the IRS that they routinely hired illegal immigrants and paid them in undocumented, untaxed sums of cash to work in the kitchens of their restaurants. The indictment accuses the owners of neglecting to pay what amounts to at least $400,000 in payroll taxes over the past two years.

It is alleged that legal employees were sought to fill more visible, server positions and were paid in accordance with U.S. law to help cover up illegal activity. Allegations against one of the chain's owners state that he specifically directed certain employees not input information on other illegal employees through government databases for fear of their deportation.

Tax fraud and illegal hiring practices of this nature often carry with them decades-long prison sentences as well as millions of dollars in fines. It will be interesting to see how Chuy's situation plays out for the owners and their accountant.

Source: AZCentral.com "Chuy's owner arrested; restaurants shut down" by Max Jarman, 4/20/11

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