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California Mother and Son Sentenced to Prison for Fraudulent Corporate Tax Returns

Posted by Fay Arfa | Jun 01, 2017 | 0 Comments

San Francisco residents, Howard Hsu and his mother, Tracy Chang, were sentenced to prison today following their convictions on tax fraud charges, announced Acting Deputy Assistant Attorney General Stuart M. Goldberg of the Justice Department's Tax Division and U.S. Attorney Brian J. Stretch for the Northern District of California.

Hsu was ordered to serve 33 months in prison and Chang was ordered to serve 12 months and one day in prison.  Hsu and Chang were found guilty following a one-week trial for conspiring to file fraudulent corporate income tax returns, filing false tax returns and aiding the preparation of false tax returns.  According to the evidence presented at trial, Hsu, 36, owned and operated Didsee Corporation (Didsee), a business incorporated in Nevada, that provided advertisement-marketing services to online websites and marketplaces.  Tracy Chang, 65, was Disdee's bookkeeper and listed as the President, Secretary, Treasurer and Director.  Chang opened bank accounts for the business, transferred money between accounts, and paid Didsee's bills.

“Every taxpayer is required to file accurate returns and to pay their fair share,” said Acting Deputy Assistant Attorney General Goldberg. “Mr. Hsu ignored that responsibility, and with today's prison sentence is held fully to account for deducting personal expenses as business expenses and filing false returns.”

“Today's sentences are a cogent reminder to all business owners that the obligation to faithfully pay taxes amounts to more than a simple duty to be fair and honest,” said U.S. Attorney Stretch.  “It is a legal obligation that, if flaunted, can land you in prison.”

“We want everyone who files a tax return to take advantage of the deductions and credits to which they are entitled by law, however, no one is entitled to defraud the United States and the American taxpayers,” said Special Agent in Charge Michael T. Batdorf of IRS Criminal Investigation (CI).   “After paying a large tax bill, Tracy Chang and her son, Howard Hsu endeavored to virtually eliminate any future tax due from their company, Didsee Corporation. Those who file accurate, honest and timely returns can be assured that the government will hold accountable those who don't. IRS-CI and the Department of Justice will investigate and prosecute those who violate our tax system.”

Hsu and Chang conspired together to file fraudulent 2008 through 2009 corporate income tax returns, and an amended 2007 corporate tax return, cheating the IRS out of approximately $500,000.  Hsu provided false summaries to Didsee's return preparers, which claimed business expenses that were not incurred and included Hsu's personal expenses.  Chang signed the fraudulent returns as Didsee's President.

In addition to the terms of imprisonment, Hsu and Chang were ordered to serve three years of supervised release and to pay $396,306 in restitution to the IRS and to pay a fine of $75,000 and $7,500, respectively.

Acting Deputy Assistant Attorney General Goldberg and U.S. Attorney Stretch thanked special agents of IRS-Criminal Investigation, who conducted the investigation and assisted the prosecution team at trial, and Assistant U.S. Attorney Colin Sampson and Trial Attorney Matthew J. Kluge of the Tax Division, who prosecuted the case.

Additional information about the Tax Division and its enforcement efforts may be found on the division's website.

Cheated IRS out of Approximately $500,000

Topic(s): Tax

Component(s): Tax DivisionUSAO – California, Northern

Press Release Number: 17-584Updated May 26, 2017

Northern District of California DOJ / 17-584 / May 26, 2017

About the Author

Fay Arfa

Fay Arfa has the distinction of being Certified as a Specialist in two separate areas of law – Criminal Law as well as Appellate Law – by the California State Bar, Board of Specialization. The National Board of Trial Advocacy has also awarded her a board Certification in Criminal Trial Advocacy. ...


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