Subway Franchisee Sentenced to Prison for Pocketing Millions in Profits and Defrauding the IRS
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Subway Franchisee Sentenced to Prison for Pocketing Millions in Profits and Defrauding the IRS

Hoque admitted that he and his co-conspirators, who were managers of his Subway franchises and gas station, conspired to defraud the United States

July 11, 2016

A Subway franchisee has been sentenced to more than two years in prison for conspiracy to defraud the United States government.

Obayedul Hoque was sentenced to 30 months in prison followed by two years of supervised release by U.S. District Judge Liam O'Grady. Judge O'Grady ordered Hoque to pay a $20,000 fine and more than $2.02 million in restitution to the Internal Revenue Service (IRS) for tax liabilities for the years 2008 through 2013.

Court documents show that Hoque owned and operated Skyhill Shell, a gas station in Alexandria, VA, along with multiple Subway restaurant franchises in the Washington, DC area.

According to the U.S. Department of Justice (USDOJ), Hoque admitted that between 2008 and 2014 he and his co-conspirators, who were managers of some of the Subway franchises and the gas station, conspired to defraud the United States for the purpose of obstructing the IRS in the ascertainment and collection of individual and corporate income taxes.

Hoque and his co-conspirators did not deposit all the gross receipts of the gas station or the Subway franchises into the corporate or partnership bank accounts. Instead, Hoque and the managers retained a portion of the gross receipts for their personal benefit and failed to report those funds to the IRS. For the Subway franchises that had no co-conspirator managers, Hoque retained all the unreported gross receipts for himself.

The USDOJ says that—for the period of 2008 through 2013—point of sales records for Hoque's Subway franchises reflected total sales of $20,805,667. However, Hoque and his co-conspirators provided false monthly sales figures to the accounting firm to prepare the Subway entities' tax returns. As a result, Hoque and his co-conspirators caused false corporate and partnership tax returns to be filed for the Subway franchises, which reported sales of only $14,377,696—a discrepancy of more than $6.4 million.

Hoque and his co-conspirators also caused false corporate tax returns to be filed on behalf of Skyhill Shell. For some years, some of the entities did not file tax returns with the IRS. Additionally, the USDOJ says that Hoque filed false individual income tax returns with the IRS. Hoque admitted that his conduct caused a tax loss to the IRS of between $1.5 million and $3.5 million.