Last year, Hani "Henry" Sawaged, owner of Daveco Liquors, which boasts of being the world's largest liquor store, earned Schmuck of the Week honors after pleading guilty to a sales-tax underpayment scheme. He and two brothers, Ghassan and Bassam Sawaged, have now been ordered to pay well over $1 million in restitution. How did the scheme work? The indictment below spells it out.
According to the indictment, the City of Thornton, where Daveco is located, conducted what's described as a "routine sales tax audit" covering the sample months of December 2006, April 2007 and May 2008. After doing so, investigators noticed a number of inconsistencies, including "at least one month of negative domestic beer sales and a significantly smaller profit than industry standards." Moreover, "a large quantity of returned products was discovered, a majority of which were made either (1) just prior to Daveco opening for the business day or (2) immediately after Daveco closed for the business day."
Can you say "red flag"? We knew you could.
In the end, auditors determined that most of the returns were fictitious. Between January 1, 2007 and June 30, 2007, for instance, 10,166 items were shown to have been returned, resulting in a sales tax refund of more than $97,000.
Of the more than 10,000 returns, however, a whopping ten of them are believed to have been genuine -- actually a higher number than from July 1 and December 31 of 2007, when only seven of 16,806 returns were apparently real.
The Daveco logo.
Creative accounting like this resulted in the Sawaged brothers saving more than $1 million in taxes -- but they're paying now. Henry pleaded guilty to violating the Colorado Organized Control Act. The deal keeps him out of jail -- he received a stipulated sentence of two years under probation overseen by the economic crime unit. But he's also been ordered to pay $1,309,423.83 in restitution.
As for brothers Ghassan and Bassam, they pleaded guilty to theft and failure to file a tax return. Their reward: a one-year deferred judgment sentence and an order to jointly pay $200,000 in restitution.
For some reason, Henry has avoided the ignominy of having a mug shot circulated -- but his brothers aren't so fortunate. Look below to see their booking photos, followed by the indictment.
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