Chong-Kak and Sang-Ok Lee - Page 6

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          underlined entry.  The invoices that corresponded to the invoice            
          numbers were "Bates-stamped" and stored in sequential order.  The           
          invoices for the cash sales that were recorded in only the actual           
          books were not Bates-stamped.  Ms. Chong destroyed most of these            
          invoices after she recorded them in the actual books.                       
               On October 13, 1989, the New York City Department of Finance           
          (the Finance Department) began an undercover investigation of               
          petitioners after an informant notified them that petitioners               
          were evading Federal and State income taxes through the filing of           
          fraudulent tax returns.  Shortly thereafter, during the course of           
          the Lees' efforts to sell Hamalee's business, Mrs. Lee and Ms.              
          Lee were introduced to two undercover agents from the Finance               
          Department posing as prospective buyers.2  Mrs. Lee showed the              
          agents Hamalee's actual books, and she explained to the agents              
          that Hamalee had a different set of books for tax purposes.                 
          Mrs. Lee explained to the agents that the actual books included             
          sales that were not recorded in the tax books.                              
               In connection with the Finance Department's undercover                 
          operation, the authorities "raided" Hamalee on October 25, 1989,            
          seizing most of Hamalee's business records and the Lees' personal           

          2 Ms. Lee was there primarily as an interpreter.                            

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