Two Kent dentists, who avoided more than $460,000 in income taxes, were sentenced Friday in U.S. District Court in Seattle to seven days in prison and 400 hours of community service for filing false tax returns.
Mike Hsieh, 48, of Kent, and Christine Chen, 46, of Renton, own Comfort Family Dentistry, Inc., in Kent, where they each still work, according to the company’s website. Between 2007 and 2014, the two took steps to illegally hide their income from the IRS to reduce their tax obligation.
At the sentencing hearing, U.S. District Judge Richard A. Jones ordered each to pay a $5,000 fine.
“It was pure greed… It wasn’t about need, it was about greed…. It wasn’t a simple mistake,” Jones said, according to an U.S. Department of Justice news release. “For eight years you had your accountant file false tax returns. You had eight separate years to change your mind and not be involved in criminal activity.”
Hsieh and Chen pleaded guilty to filing false tax returns in August. Filing a false tax return is punishable by up to three years in prison and a $250,000 fine.
According to records filed in the case, Hsieh and Chen maintained two sets of financial statements for the business—one showing the actual expenses and another showing inflated expenses. The fraudulent expense statements were given to their accountant for tax preparation. The pair also established a bank account that was not disclosed to the tax preparer. Patient fees deposited into the account were not reported as income. The pair also took cash proceeds from the dental practice and never reported that income to the accountant or on their taxes.
For tax year 2013, Hsieh admits he reported a taxable income of $232,753 when it was really more than $100,000 higher. Hsieh should have paid taxes on income of $348,663. For tax year 2013, Chen reported income of $319,131 when her true income was $425,679. For all the tax years between 2007 and 2014 they each admit failing to pay about $231,000 in taxes that they should have paid.
Both dentists own multiple properties and dental practices. Chen lists assets exceeding $4 million, while Hsieh lists assets of more than $2 million.
In his sentencing memorandum, Assistant U.S. Attorney Brian Werner noted:
“This was a deliberate, calculated scheme to cheat the government…. (These) defendants (were) not in need of money…. There was no need to cheat the government – this offense was motivated purely by greed,” Werner said.
Both defendants will pay slightly more than $231,000 in restitution. Their attorneys estimate they will also need to pay an additional $300,000 in interest and penalties to the IRS. In arguing that Hsieh and Chen should avoid prison time, their attorneys noted that their criminal conviction prompted one bank to end its relationship with them, and that the dental practice was dropped as a preferred provider by a large dental insurance plan.
“Dr. Hsieh and Dr. Chen, each filed false tax returns that underreported income and inflated expenses at their dental practice in order to avoid paying income taxes,” said IRS-Criminal Investigation’s special agent in charge Justin Campbell. “Their criminal scheme lasted years and cheated the Treasury of hundreds of thousands of dollars. Taxpayers should have confidence that IRS-Criminal Investigation will aggressively pursue tax fraud and ensure that all business owners pay their fair share.”
Hsieh has more than 10 years of experience in dental practice, according to the Comfort Family Dentistry website. He is a graduate of the UCLA School of Dentistry with a doctor of dental surgery degree. Hsieh started his career in Vancouver, British Columbia where he was a general practitioner as well as a clinical instructor at the University of British Columbia Faculty of Dentistry for four years.
Chen grew up in Southern California and majored in biology at UCLA, according to the Comfort Family Dentistry website. After graduating summa cum laude from UCLA in 1996, she completed four years at the University of Southern California School of Dentistry, graduating top of her class in 2001 with a doctorate in dental surgery degree. She has been in private practice in Washington state since 2001.