A federal indictment has been unsealed today detailing allegations of a massive plan by Farmington Hills-based Happy's Pizza to defraud the government out of millions in tax dollars.
Happy's Pizza founder and owner, Happy Asker, along with executives and West Bloomfield residents Maher Bashi and Tom Yaldo, are named in the 62 count indictment. They were arraigned today at U.S. District Court in Detroit.
The IRS alleges the group implemented a scheme from 2004 to 2011 which was designed to systematically underreport the taxable income and payroll taxes of Happy's Pizza franchises. They then distributed the gains among the defendants and Happy's Pizza franchisees.
The scheme was known within the Happy's Pizza franchises as the "Profit Split Scheme".
As part of the scheme, it is alleged the defendants instructed Happy's Pizza franchise partners to maintain two sets of books and records for every franchise. One set was fudged, and then provided to accountants for the purpose of preparing false tax records. The second set recorded the true and accurate income and expenses for each franchise and was known as the "Dome Books".
Once a week, using the "Dome Books", a net profit figure was calculated for each Happy's Pizza franchise and distributed to each partner in cash.
The indictment states that from 2004 to 2011, Happy's Pizza franchises paid more than two million in wages to shareholders and employees that went unreported to the IRS.
The scheme alleges many employees were asked to fill out false W-2 forms, including only a portion of the cash they were paid.
The allegations are that in some cases, Happy's Pizza tax filings hid more money than they reported they made. The restaurant on Southfield Road in Lathrup Village reported they made $501,114 for 2006. The federal indictment states that same year, they neglected to report $685,000.
Tagrid Bashi and Arkan Summa are both named in the indictment as well, as having profited from this scheme.
Statement from Happy's PizzaFranchise, LLC in response to the charges:
We are gratified that the speculation and innuendo that accompanied the federal government’s raid of our corporate offices has ended. In August of 2010, nearly 30 DEA, ATF and IRS agents stormed the corporate offices of Happy’s Pizza Franchise and seized all business and personal records to much hype and media speculation.
Today, after nearly three years of investigation and with the full cooperation of our company, it was finally revealed that neither the DEA nor the ATF found any evidence of wrongdoing.
The present indictment of founder Happy Asker is premised solely on the alleged underreporting of income by 7 of our 100 independently owned and operated franchisee restaurants. Over 3 years, the IRS utilized its immense resources to exhaustively investigate all 100 of our franchisee restaurants in over 6 states as well as the supporting businesses and employees that make up the Happy’s Pizza system to ultimately allege irregularities in tax reporting.
As stated by the Department of Justice in their press release on this case, all Americans, even those facing a seemingly imposing indictment, are presumed innocent. With the continued support of our franchisees, employees, business associates and, most importantly, our loyal customers, we look forward to continuing regular business operations while vigorously defending our founder against these baseless allegations.