Massachusetts restaurateur sentenced for multiple fraud schemes
BOSTON – A restaurant owner was sentenced Wednesday in federal court in Boston for committing tax and insurance fraud involving 11 Boston-area restaurants, and for committing visa and immigration fraud. The sentencing follows a multiagency investigation, which included U.S. Immigration and Customs Enforcement (ICE) Homeland Security Investigations (HSI).
Hazrat Khalid Khan, 58, a Pakistani national residing in Middletown, New York, was sentenced to 30 months in prison and one year of supervised release, and will be subject to deportation proceedings upon completion of his sentence. Khan was also ordered to pay restitution of $2,343,155 to the Internal Revenue Service (IRS) and $27,863 to two insurance companies he defrauded.
In April 2017, Khan pleaded guilty to conspiring to defraud the IRS, failing to collect and pay over taxes, committing mail fraud, making false statements on a naturalization application and committing visa fraud. The sentence resolves two federal cases in the District of Massachusetts and one brought in the Southern District of New York. The whereabouts of two of Khan’s co-defendants, Khursed Iqbal and Rahman Zeb, also Pakistani nationals, remains unknown.
Khan was the partial owner of 11 fried chicken takeout restaurants in greater Boston, including Roxbury, Chelsea and Mattapan. As part of a tax fraud scheme that ran for years, Khan and his co-conspirators – generally the managers of these restaurants – defrauded the government and avoided paying payroll and income taxes owed by the stores. They paid their employees in cash and provided tax preparers with false information about the restaurants’ payroll and income, thereby causing the tax preparers to file false tax returns.
Federal law requires employers to withhold payroll taxes, which includes Social Security and Medicare taxes, and then pay them over to the IRS. To avoid paying taxes, Khan and several co-conspirators falsely reported to the IRS the number of employees at their stores, some of whom were undocumented workers, and the wages they paid them. They also failed to file W-2s showing wages paid to employees and falsely described on tax returns their sales, total income, compensation of officers, salaries and wages, and taxable income. Khan and his co-conspirators also failed to withhold payroll taxes and pay them over to the IRS, resulting in approximately $2.3 million in unpaid federal payroll and income taxes over a five-year period.
Khan also underreported payroll to the workers’ compensation insurance providers for the 11 restaurants he and his co-conspirators controlled, thereby defrauding insurers. Lastly, Khan repeatedly made false statements to obtain immigration benefits. Specifically, on two occasions – first in connection with obtaining legal permanent resident status and again when applying to naturalize as a U.S. citizen – Khan falsely denied that he had previously been arrested or convicted of a crime, when in fact, Khan had been previously convicted in federal court of alien smuggling.
Acting United States Attorney William D. Weinreb; Joel P. Garland, Special Agent in Charge of the Internal Revenue Service’s Criminal Investigation in Boston; Harold H. Shaw, Special Agent in Charge of the FBI, Boston Field Division; Michael Shea, Acting Special Agent in Charge of HSI in Boston; and Boston Police Commissioner William Evans, made the announcement. The case was investigated with the cooperation of the Massachusetts Insurance Fraud Bureau.