A U.S. District Court judge sentenced the owner of LadyBug Espresso bikini barista stands to 10 months in prison and a $75,000 fine for failing to report as much as $6 million in revenue.
Ladybug Espresso has locations in Kent, Auburn, Renton, Tukwila and other cities.
Between 2016 and 2020 Assad Baragzai, 47, of Yarrow Point, failed to report as much as $6 million in income on his tax returns, according to a Dec. 19 U.S. Department of Justice press release.
At the sentencing hearing in Seattle, U.S. District Judge Tana Lin said, the tax system “is an honor system… and you weren’t honorable. (There was) absolutely no reason for you to be cheating on your taxes except for pure greed.”
According to records in the case, Baragzai significantly under-reported his income when he provided information to his tax accountant. The government believes that the tax loss over the five years that Baragzai underreported his income is more than $1.7 million. The tax loss in 2017 alone is more than $687,000. Baragzai disputes the government figures and argued that he had some legitimate deductions making the tax loss $1.3 million. Judge Lin determined the tax loss was $1.348 million.
Baragzai pleaded guilty on Aug. 29 in the U.S. District Court in Seattle to having created and subscribing a false tax return, and having not reported up to $6 million in income between 2016 and 2020, according to court documents. At that time, the U.S. Department of Justice listed his hometown as Auburn. He reportedly moved to Yarrow Point, an affluent city on the shores of Lake Washington.
“Our government relies on the 85% of Americans who each year pay the taxes they owe to keep communities safe, and provide all the other important services we need,” said U.S. Attorney Tessa M. Gorman. “Mr. Baragzai had great business success, but failed to fund the community that made that success possible. Such conduct is not erased by paying what is owed some five years later – it is appropriate that he serve prison time for his willful tax fraud.”
In asking for a two-year prison term Assistant U.S. Attorney Mike Dion wrote to the court:
“Assad Baragzai reaped the benefits of American society but somehow convinced himself that he did not need to pay his share of the costs that support that society. All Americans pay a price for this kind of selfishness. For example, school lunches are provided by the United States Department of Agriculture’s Food and Nutrition Service. But for this prosecution, Baragzai’s tax fraud would have cost the government the equivalent of 462,000 school lunches.”
Baragzai is the second defendant to be sentenced in this investigation. In October, Baragzai’s brother-in-law, 45-year-old Rajesh Mathew, of Auburn, was sentenced to 30 days in jail, a $5,000 fine, and 100 hours of community service for making and subscribing a false tax return.
“Instead of paying his fair share toward public resources as every law-abiding American does, Mr. Baragzai misrepresented his income to furnish an already-lavish lifestyle,” said Adam Jobes, special agent in charge of IRS Criminal Investigation’s Seattle Field Office.
Baragzai has agreed to pay restitution to the IRS. He may also face additional civil penalties, fines, and interest for the tax loss.
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