The Office of the New York State Attorney General (“NY AG”) announced it has reached a settlement with a chain of supermarkets operating throughout New York City, resolving claims that the chain engaged in a series of fraudulent tax avoidance schemes by underreporting cash sales and paying workers off the books.  The chain will pay $4.7 million to resolve the allegations.

According to the settlement, the chain engaged in multiple fraudulent schemes to evade paying taxes.  First, the chain allegedly used standalone cash registers associated with New York State Lottery machines to record cash sales of non-lottery supermarket items without paying income tax or sales taxes on those cash sales.  Second, the chain allegedly diverted cash proceeds from sales by generating fake return receipts falsely claiming that items sold had been subsequently returned by customers, allowing the chain to underreport thousands of dollars in sales revenue each day.  Finally, the chain allegedly paid the majority of its employees off the books, thereby avoiding thousands of dollars in withholding deductions every week.

The NY AG’s investigation commenced after a whistleblower filed a lawsuit under the qui tam provisions of New York False Claims Act.

Read the NY AG press release here.

Click here to read about G&G’s work in the largest ever tax whistleblower recovery in New York State history.