The owners of a College Point spa with a troublesome past will pay big for fraud charges, the state attorney general announced on Thursday.
Spa Castle Inc., located at 131-10 11th Ave., and Spa Castle Corporate Officer Daniel Chon both pleaded guilty to felony tax fraud charges on Aug. 23. Spa Castle will pay a total of $2.5 million in criminal restitution and civil damages.
“We have zero tolerance for tax cheats who leave New Yorkers to foot the bill,” said Attorney General Barbara D. Underwood. “The defendants orchestrated a multimillion-dollar scheme to defraud taxpayers. We’re grateful to the whistleblower who helped bring this egregious conduct to light – and it should serve as a wake-up call to all tax fraudsters who think their misconduct will go by unnoticed.”
Spa Castle, which offers services such as massages, saunas, facials, swimming pools and other amenities, reportedly generated $22 million per year in revenue between 2010 and 2013. According to court documents, a whistleblower filed an action pursuant to the qui tam provisions of the New York False Claims Act in the fall of 2014, prompting a civil investigation into Spa Castle.
After the preliminary investigation into the information that the tipster provided, a criminal investigation was opened against Spa Castle; investigators determined that management had substantial indications of knowingly fraudulent conduct.
In August 2015, investigators executed a search warrant of the Spa Castle facility and found records that indicated that the defendants avoided paying required sales, corporate and MTA surcharge taxes by underreporting the money that was earned at the facility by millions of dollars. The criminal indictment was filed against Spa Castle and its owners in March 2017.
“This conviction proves that the local community is watching and they won’t stay silent when business owners violate their trust,” said Acting Tax Commissioner Nonie Manion. “Robbing New Yorkers of funding for vital public programs and services carries serious consequences and we’ll continue to work with the Attorney General and all our law enforcement partners to bring tax cheats to justice.
Spa Castle has had a lengthy, dubious history with the law. In February 2018, it was reported that the spa was hit with a fine for violating child labor laws. Two years prior in 2016, a 6-year-old girl nearly drowned in a Spa Castle pool, prompting the city to shut down the spa to investigate their facilities.
It was also reported that there were several instances of patrons having sex inside the spa’s pools. The Health Department also hit Spa Castle with 49 violations between 2014 and 2015.