Honolulu gun dealer Arthur Lee Ong is going to federal prison for four years and three months for tax evasion.
In addition, he must pay $1,016,768 in restitution to the Internal Revenue Service for income taxes he owes for 1994 to 2009, plus a $10,000 fine and $8,001 to the government for the cost of his prosecution.
U.S. District Judge Leslie E. Kobayashi handed down the sentence of 51 months Tuesday but is giving Ong, 53, two months to turn himself in to begin serving his prison term.
Ong asked Kobayashi to allow him to remain free until his daughter completes the elementary school year, and time to relocate his family near the federal prison facility that will be selected for his incarceration.
Tuesday’s conviction makes it unlawful for Ong, owner of Magnum Firearms, to possess or own firearms or ammunition.
Ong said he is donating his Kakaako business to New Hope International, with the transfer of stock shares effective April 1. He said his accountant estimated the value of Magnum Firearms at $4.5 million.
Wayne Cordeiro, New Hope Christian Fellowship founding pastor, who attended Tuesday’s sentencing, said New Hope International plans to sell the business.
Ong’s lawyer Robert K. Fricke said Ong attends the New Hope church.
Magnum, one of the state’s largest gun dealerships, has a long history of providing firearms and related products and services to military, state and local law enforcement agencies, to private security companies and to consumers.
Fricke said Ong has already paid back most of the taxes he owes but might still owe interest and penalties.
Federal prosecutor Todd P. Kostyshak said Ong also owes back taxes to the state of Hawaii.
A federal jury found Ong guilty in November of one count of conspiracy to defraud the government and failing to file income tax returns on time for 2000, 2001, 2002, 2004, 2005 and 2006.
However, Kobayashi found that Ong evaded paying income taxes since 1994 through a scheme that involved sham trusts.
The government said Ong conspired with convicted tax protester Royal LaMarr Hardy and Hawaii island lawyer Paul Sulla to set up the trusts into which he diverted his earnings to evade paying income taxes yet used money from the trusts to pay for personal expenses including purchasing luxury cars and real estate.
Hardy and Sulla were identified by their initials as unindicted co-conspirators in the indictment against Ong.
Ong said Tuesday that based on Sulla’s advice, he thought what he was doing was legal. It wasn’t until 2006, following the conviction of Hardy, in whose trial he testified, that he realized that it wasn’t legal. He then said he tried to correct his wrongdoing.
