First U.S. Prosecution Over ‘Zapper’ Software Nets Guilty Plea

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By Paul Shukovsky

A Seattle-area restaurant owner accused of using software to hide receipts and steal sales tax revenue pleaded guilty Aug. 30 in the first such prosecution in the U.S., the Washington Attorney General’s office said.

Yu-Ling Wong, owner of Facing East Restaurant in Bellevue, Wash., will pay $300,000 in restitution to the state Department of Revenue under terms of a plea agreement that includes a count of unlawful use of sales suppression software as well as counts of theft and filing false or fraudulent tax returns ( Washington v. Yu-Ling Wong , Wash. Super. Ct., No. 16-1-00179-0, plea entered 8/30/17 ).

The burgeoning use of “zapper” software “is not only a national problem, it’s a worldwide problem,” said Mike Chertude, computer assisted audit program manager for the revenue department.

“In the U.S., we are finding more and more cases around the country,” Chertude told Bloomberg BNA Aug. 31.

At least 24 states have enacted anti-zapper legislation, according to a National Conference of State Legislatures briefing paper. A prosecutor who worked on the case said it was the first in which a defendant was charged with criminal use of sales suppression software.

Unique Monitoring Agreement

“My office is always on the lookout for new technologies scammers are using to hurt consumers,” Attorney General Bob Ferguson told Bloomberg BNA in an Aug. 31 email. “Sales suppression software helps dishonest businesses steal from Washington taxpayers. My office is committed to stopping tax cheats who siphon funding from our schools, parks and emergency services.”

Wong’s attorney, Robert Chicoine of the Chicoine Law Group in Seattle, said his client avoided prison time because of her significant cooperation, including entering into a unique, real-time monitoring agreement of her restaurant’s books.

“Zappers are being used in many restaurants and other businesses throughout the country, and I think it’s a significant problem,” Chicoine said. “Often kitchen staff who come from different cultures want to be paid in cash. And this is a problem for small restaurants.”

Chicoine and co-counsel Richard Ainsworth, a champion of state anti-zapper laws and a law professor at Boston University, worked to locate software experts who could institute the monitoring, which Chicoine believes will eventually be adopted in such cases around the country.

“It offers a real-time means for a government to record as it happens the receipts of any business and can be remotely viewed without going through audits,” Chicoine said.

To contact the reporter on this story: Paul Shukovsky in Seattle at PShukovsky@bna.com

To contact the editor responsible for this story: Jennifer McLoughlin at jmcloughlin@bna.com

For More Information

Text of the plea agreement is at http://src.bna.com/r98.

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