Bikini coffee stand owner pleads guilty to tax evasion

The owner of a string of Washington bikini coffee stands pleaded guilty on Aug. 29 in the U.S. District Court in Seattle in a multimillion-dollar tax avoidance case

Assad Baragzai, 47, of Auburn pleaded guilty to creating and subscribing a false tax return, having failed to report “as much as $6 million in income on his tax returns” between 2016 and 2020, according to documents.

Baragzai serves as the owner of Ladybug Espresso, a bikini barista coffee stand chain with locations in Seattle, Renton, Kent, Auburn and more.

According to the U.S. Department of Justice, Baragzai is the second defendant to enter a guilty plea in the investigation, with Baragzai’s brother-in-law, 45-year-old Rajesh Mathew of Auburn, pleading guilty in March 2024 to making and subscribing a false tax return.

The Internal Revenue Service Criminal Investigation department investigated the case.

U.S. District Judge John H. Chun will sentence Baragzai to up to three years in prison at Baragzai’s sentencing hearing, scheduled for Nov. 18, 2024. Mathew’s sentencing hearing will occur on Oct. 9, 2024.

In his plea agreement, Baragzai admitted to under-reporting his income when he provided information to his tax accountant, according to the justice department. The government believes the tax loss in the five-year span that Baragzai underreported his income is more than $1.7 million.

“The tax loss in 2017 alone is more than $687,000,” according to the justice department.

According to the department, Baragzai disputes the government figures and believes the tax loss to be $1.3 million. A judge will determine the tax loss at the Nov. 18 sentencing hearing.

Baragzai and Mathew have agreed to make restitution to the Internal Revenue Service, with both facing the potential of additional civil penalties, fines, and interest for the tax loss.