Tiny Broadway taco shop and its Guaymas family of restaurants comes up big as state drops $5.6M tax case

Attorney General Bob Ferguson and investigators from the Washington State Department of Revenue who started their search at a Broadway restaurant have huevos rancheros on their face after allegations of a $5.6 million tax fraud scheme at the Seattle chain of Tacos Guaymas fizzled into a poquito $750 fine.

“It is really a great example of the philosophical Occam’s razor,” Robert Chicoine, lawyer for Tacos Guaymas owner Salvador Sahagun said in a statement to CHS. “If there are two explanations for an occurrence, the one that requires the least speculation is usually the correct explanation.”

Ferguson’s office charged Sahagun earlier this year with six counts of first-degree theft and three counts of possessing and using sales suppression software in what the AG said was a multi-year scheme to pocket more than $5.6 million in sales tax from cash transactions.


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The investigation began with a September 2014 visit by DOR investigators posing as customers at the Broadway Tacos Guaymas where prosecutors said they had proof an estimated $78,000 in tax revenue went missing from the Capitol Hill location of the restaurant over the years. No charges were brought for use of suppression software on Broadway due to the statute of limitations expiring. But the AG said other Tacos Guaymas locations were using the software to suppress sales totals and owed $5,615,497 to the state.

Chicoine is building a practice in Seattle battling sales suppression cases and says he represents a number of restauranteurs accused of electronic sales suppression tax fraud. His defense team was able to show that “many of the DOR audit conclusions were flawed and that the DOR agents did not fully understand the technology involved.”

“At the highest level, the Department of Revenue and the State charged Salvador with an intent to defraud the DOR without doing the necessary due diligence,” Chicoine said. “They based their decision to charge him on a host of erroneous assumptions and unreliable evidence.”

Chicoine provided an example of how he says the DOR got the case wrong. During the investigation, DOR concluded that a few missing tickets was evidence of fraud and “concluded that apparent gaps in the numbering sequence of tickets must be de-facto evidence of intentional data manipulation resulting in huge amounts of unreported income,” Chicoine said. “That is just one of a number of DOR assertions that served as the underpinning of their case, which all proved erroneous.”

This fall, the nearly $6 million case was settled as Sahagun entered an Alford plea on a much smaller charge of second degree theft in a new, less than $10,000 case as part of a settlement deal with the state. In the new case brought this fall, Sahagun said embezzlement by a former management employee was the likely cause of the underreporting to the state but that he believed that the likelihood of conviction — and his deal with the Attorney General — warranted a guilty plea:

A spokesperson for the Attorney General’s office provided only a brief explanation of the deal and $750 fine. “The Attorney General’s Criminal Litigation Unit dismissed the personal charges against Mr. Sahagun,” the spokesperson said. “In exchange, his corporation pled guilty to felony theft in the second degree. The court imposed a fine of $750 and ordered the corporation to pay a $500 victim penalty assessment to the state.”

For Sahagun, the end of months of litigation is a welcome relief. “When I came into work, one of my employees showed me the story in the paper. I was shocked the state filed criminal charges against me based on unrealistic assumptions and unsupportable estimates,” Sahagun said in a statement. “The Department of Revenue assumed that I was using advanced technology designed to cheat the government in ways that I never could, and never would.”

“We were pleased that once we demonstrated to the Attorney General’s trial lawyers that the DOR had overreached, and couldn’t prove its case, the Attorney General agreed to drop all charges. Now Salvador has the difficult task of rebuilding his business,” Chicoine said.

Sahagun started Tacos Guaymas in West Seattle 25 years ago. His Capitol Hill location moved to the 1400 block of Broadway when Chipotle took over the original space in 2012.

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