Settlement reached in suit alleging gas stations' tax fraud

A gas station in Des Plaines and 12 others in the greater Chicago area were defendants in a sales-tax fraud lawsuit that was resolved by a $4.5 million settlement, Illinois Attorney General Lisa Madigan announced Friday.

The lawsuit filed by Madigan's office also named two gas-station owners as defendants.

The Des Plaines gas station named in the suit is at 800 W. Touhy Avenue. The others are in Chicago, River Grove, Norridge, Stone Park and Olympia Fields.

The lawsuit alleged that since 2002m the defendants had submitted false sales tax returns to the Illinois Department of Revenue, resulting in millions of dollars of lost revenue to the state.

The suit further alleged that the scheme operated by underreporting general merchandise sales and using inaccurate sales tax reporting rates.

Ten of the gas stations remain in operation and are owned by George Nediyakalayil, with Tito Kandarapallil as co-owner of one of them.

"This settlement is another warning to business owners considering ripping off Illinois residents and the state by failing to pay their taxes," Madigan said in a written statement.

The settlement resolves the allegations brought in the lawsuit filed under the whistleblower provisions of the Illinois False Claims Act, which permits private parties to file suit on behalf of the state and share in a portion of the recovery. The claims settled by the agreement are allegations, and there has been no determination of liability, Madigan said.