Economist tied to fake art faces tax charges
Seattle Times staff reporter
A prominent economist whose Seattle art gallery was exposed for selling fake Chinese antiques now faces federal tax-fraud charges and a state investigation of the gallery.
The Justice Department yesterday charged Steven Ng Sheong Cheung and his wife, Linda Su Cheung, with conspiracy to defraud the United States by failing to report millions of dollars in income from Hong Kong parking lots and other businesses.
In a separate action, the state attorney general announced an investigation into Thesaurus Fine Arts, the Pioneer Square gallery the couple owns. That investigation results from a Seattle Times story revealing that Thesaurus was selling fake antiques in the store and on the eBay Internet-auction site.
The federal indictment, issued in U.S. District Court in Seattle, caps a lengthy investigation of the Cheungs' income from Hong Kong parking lots, offshore corporations and secretive money transfers from Hong Kong to the Seattle area.
The Cheungs, who are U.S. citizens, have homes in Hong Kong, Seattle and Shanghai, China. Steven Cheung, 67, is a former economics professor at the University of Washington and at Hong Kong University and is regarded as one of Asia's best economists. He writes a newspaper column and is a celebrity in Hong Kong.
He is charged with six counts of filing false tax returns and six counts of failing to file a report of a foreign bank account. He faces up to 83 years in prison and $4.75 million in fines if convicted.
Linda Cheung, 56, is charged with one count of conspiracy, punishable by up to five years in prison and a $250,000 fine.
Assistant U.S. Attorney Janet Freeman said Cheung hid income since at least 1989 and secretly transferred money since at least 1993. U.S. citizens are required to report income from anywhere in the world.
Cheung used the money, prosecutors say, to invest in companies, including a bank and an airplane-parts firm; to buy real estate, including a $1.1 million home and an apartment building in Seattle; and to buy a $294,000, 44-foot SeaRay yacht called the "Westwind."
The 28-page indictment described Thesaurus Fine Arts as part of the "web of corporations" in the tax conspiracy. The store has been closed since Sunday, when The Times investigation was published, and yesterday a sign said it was closed until the staff returned from vacation.
Cheung insists he is innocent and did not know he was supposed to report the income in question. In an interview with The Times last week, he said, "I was framed" in the tax case.
Cheung, who is now in Hong Kong, has waived extradition and agreed to appear for arraignment in Seattle on Feb. 20, Justice Department spokesman John Hartingh said.
The indictment says Cheung tried to hide his ownership of companies that operated more than 50 public parking lots in Hong Kong with annual receipts in the tens of millions of dollars, among other businesses.
He took cash and other income from the parking lots and sent cash and cash wire transfers to the United States "to attempt to prevent the tracing of funds," the indictment charges.
The IRS said the listed owner of the businesses, Celinal Ltd. of the British Virgin Islands, is actually Cheung. The word "Celinal" is formed from the names of Cheung's wife and children.
IRS Special Agent Steven Pasholk said in a news release, "This is another example of how the IRS is actively pursuing the use of offshore financial arrangements in order to avoid tax."
U.S. Attorney John McKay in Seattle credited Hong Kong authorities with "remarkable assistance" in the investigation.
Prosecutors charged Cheung with laundering millions of dollars from Hong Kong through Washington corporations and investments, including:
• $693,000 in 1993 to invest on his behalf in Asia Europe Americas Bank of Seattle.
• $1.1 million in 1996 to buy part of the University Heights Apartments in Seattle.
• $3.5 million in 1997 to purchase Dow Elco, an airplane-parts manufacturing company in Montebello, Calif.
• $1.7 million in 1997 to buy waterfront property in Anacortes.
• $116,725 in 1997 to buy unspecified fine art from Christie's auction house in New York.
The indictment lists Thesaurus Fine Arts as being among "the web of corporations and other entities" the Cheungs used to hide income.
The Times was unaware of the Justice Department's tax investigation of Cheung until the latter stages of the newspaper's reporting on Thesaurus Fine Arts.
In interviews with The Times, Cheung had adamantly denied he owned the gallery. But this week he told Apple Daily, a Hong Kong newspaper at which he is a columnist, that he and his wife own part of the store.
The Times' investigation revealed that many of the antiques sold by Thesaurus in the store and on eBay are considered obvious fakes by experts in Chinese art. The newspaper purchased two pieces that were sold by Thesaurus as ancient but were shown in tests to be much newer and less valuable.
In response, the Consumer Protection Division of the state attorney general opened its own investigation Monday.
The state investigators are working with eBay, a spokesman for the Internet company confirmed. Thesaurus was still selling items on eBay yesterday, and a note on some items claimed the ones the newspaper proved were fakes were, in fact, authentic antiques that had been tampered with by the newspaper or a mailing service.
"We stand for our honor and our guarantee policy always stands," the company writes on eBay.
Four people who bought objects at eBay contacted the newspaper this week, and at least one of them, who paid more than $30,000, began trying to return his items.
Steve Cheung's criminal defense attorney in Seattle, Rob McCallum, a former tax prosecutor, and Linda Cheung's attorney, Allen Bentley, did not return calls for comment yesterday.
Cheung had an unusual response Monday night to the Times articles questioning his integrity as an antiques dealer.
"Your article was wonderful!" he said. "It helped a lot. ... Thank you! Thank you!"
Cheung added, "The fireworks begin tomorrow," and hung up.
Times reporters Steve Miletich and Mike Carter contributed to this report. Duff Wilson: 206-464-2288 or firstname.lastname@example.org.