A San Jose restaurateur who admitted he fraudulently obtained and misused millions of dollars in COVID-19 relief funds has been sentenced to 30 months in federal prison, federal officials announced Thursday.
David Tai Leung, 58, of Sacramento, pleaded guilty in February to three counts of wire fraud, in connection with fraudulently obtained loans he received from the federal Restaurant Revitalization Fund (RRF) and the Paycheck Protection Program (PPP). He was originally indicted on those charges in August 2022.
The sentence was handed down by U.S. District Court Judge Charles R. Breyer in federal court in San Francisco.
In his plea agreement, Leung also admitted that he applied for and received two PPP loans that he had misused to enrich himself—one for $257,100 that was funded in April 2020 and a second for $360,055 that was funded in March 2021. Rather than use those funds for approved business-related expenses for the Tomi Sushi and Seafood Buffet at the Eastridge Mall in San Jose, Leung admitted he used the money to make payments to a Lexus dealership and to spend at a casino in Northern California.
Ultimately, Leung admitted he received approximately $5.6 million in RRF and PPP funds and that he unlawfully used $3,359,701 of those funds. Leung agreed, and was ordered to pay that amount in restitution.
The prosecution team led by U.S. Attorney Ismail J. Ramsey involved investigators from the FBI, the Small Business Administration and the Office of Inspector General.
According to his plea agreement, Leung—who co-owned and controlled the finances of the San Jose restaurant—submitted an application in May 2021 for $5 million in RRF funds that he certified he would use for approved business-related expenses like payroll, business rent or mortgage costs, and business maintenance expenses and utilities.
Leung admitted to authorities that he knew when he made these certifications that, in fact, he intended to use the RRF funds for purposes other than those he had indicated on the application. In reliance on the statements and certifications in Leung’s application, the SBA granted the application and funded the loan in full in June 2021.
Leung admitted he then transferred $3.5 million to a personal investment account he controlled and used RRF funds to purchase securities and pay fees associated with the refinancing of the mortgage on his personal residence in Sacramento, all in violation of RRF program requirements restricting the use of RRF funds to specified eligible business-related uses.
The PPP was administered by the SBA as part of the Coronavirus Aid, Relief, and Economic Security Act, a federal law enacted in 2020 to provide billions of dollars in emergency financial assistance to millions of Americans suffering from the economic effects of the COVID-19 pandemic. The RRF was administered by the SBA as part of the American Rescue Plan Act, a federal law enacted in 2021 to provide funding and support to restaurants, bars, and similar businesses serving food and drink that suffered revenue losses as a result of the COVID-19 pandemic and related mitigation measures. The PPP and RRF provided forgivable loans and grants to small businesses for job retention and certain other qualified business expenses.
In addition to sentencing Leung to prison and ordering him to pay more than $3.3 million in restitution, Breyer ordered the defendant to serve three years of supervised release to begin after his prison term is completed.
This week’s sentencing is the most recent in a string of business fraud cases involving Leung.
Last November, California Attorney General Rob Bonta along with the Department of Tax and Fee Administration, Employment Development Department and the Department of Industrial Relations announced that Leung had pleaded guilty to eight felony counts for cheating his employees and defrauding the state through tax evasion.
Leung formerly owned Kome Japanese Seafood Buffet Inc. in Daly City, Tomi Japanese Seafood and Grill Inc. in San Jose, and Tomi Japanese Seafood Buffet in Concord. In the state case, Leung pleaded guilty to eight felonies including six counts of wage theft, tax evasion, and filing a false tax return.
The California Department of Justice’s (DOJ) Tax Recovery in the Underground Economy (TRUE) Task Force prosecuted the case in partnership with multiple state agencies.
“Tax evasion and wage theft harm hard working Californians trying to make ends meet and seriously impact our state’s ability to provide critical services for Californians,” said Bonta. “David Leung purposefully evaded his obligations as a taxpayer and exploited his employees for his own gain.”
“Together with workers and community organizations that represented or assisted the primarily Chinese-speaking workers who were cheated out of their earned wages, my office was able to secure $2.6 million in compensation for these workers in 2020,” said Labor Commissioner Lilia García-Brower. “Wage theft is a crime that has profound impacts on families, and ripple effects throughout our communities and the economy.”
The guilty plea was the result of an investigation by the TRUE Task Force. TRUE began investigating suspected wage theft, sales and employment tax evasion, and suppression of sales by Leung in 2017. Leung was charged with stealing more than $893,000 in wages from employees and evading $287,697 in sales tax to CDTFA and $171,821 in employment taxes to EDD.
In a prior separate civil case, in June 2018, the state Labor Commissioner accused Leung and other owners of the Kome Japanese Seafood Buffet in Daly City of violating minimum-wage laws, overtime and other wage protections for 133 workers.
Leung and his co-owners agreed to a $2.6 million settlement to compensate the former employees in 2020. That restaurant shut down in January 2019.
