Spa Castle To Pay $2.5 Million After Pleading Guilty to Tax Fraud

Spa Castle (via Google Maps)

Aug. 24, 2018 By Tara Law

A troubled Flushing spa will have to cough up millions to the state after the company and its owner pleaded guilty to tax fraud, the state district attorney announced yesterday.

Spa Castle at 131-10 11th Ave in College Point, was convicted of criminal tax fraud charges, and must pay $2.5 million in restitution and civil damages for orchestrating the fraudulent scheme.

Daniel Chon, one of the owners of Spa Castle, was sentenced to a three-year conditional discharge after pleading guilty to attempted criminal tax fraud, and will serve no jail time, according to the New York Post.

“We have zero tolerance for tax cheats who leave New Yorkers to foot the bill,” said Attorney General Barbara Underwood. “The defendants orchestrated a multi-million dollar scheme to defraud taxpayers.”

The spa, which provides services such as massages, facials, saunas, swimming pools, restaurants and bars, generated more than $22 million a year in revenue between 2010 and 2013, according to the district attorney’s office.

A fall 2014 tip by a whistle blower sparked a civil investigation by the attorney general’s Taxpayer Protection Bureau.

Investigators discovered significant signs that the spa was committing fraud, which prompted the attorney general’s Criminal Enforcement and Financial Crimes Bureau to start a parallel criminal investigation into the business.

The attorney general’s office and the New York State Department of Taxation and Finance then executed a search warrant at the spa in Aug. 2014. During their search, they discovered records indicating that the spa was under-reporting millions of dollars worth of income to avoid paying taxes.

The attorney general filed a criminal indictment against the spa in March 2017.

On Thursday, Spa Castle pleaded guilty to second degree criminal tax fraud, a class C felony, while Chon pleaded guilty to third degree attempted criminal tax fraud, a class E felony.

Attorney General Barbara Underwood said prosecutors are grateful to the whistleblower for directing them to the spa.

She said that Chon’s conviction should be a “wake up call” for people guilty of fraud.

Acting Tax Commissioner Nonie Manion said that the tax department will continue to work with the attorney general’s office to stop fraudsters from stealing from the state’s programs.

“This conviction proves that the local community is watching and they won’t stay silent when business owners violate their trust,” said Manion.