Robert Mattei, Leo McGlynn, Brian Welsh, Joseph Donnelly, and Elena Ruiz, the owners and managers of the Nifty Fifty’s restaurant chain, were charged today by information in a tax evasion conspiracy that allegedly defrauded the Internal Revenue Service by failing to properly account for more than $15 million in gross receipts. Nifty Fifty’s restaurants are located in Pennsylvania and New Jersey. The case was brought in the Eastern District of Pennsylvania.
An information is a formal charging document, but differs from an indictment in that a grand jury was not convened to review the evidence and decide whether probable cause exists to issue an indictment. Because an information was issued in this case, the judge at the preliminary hearing will determine whether probable cause exists.
The individuals are charged with conspiracy to commit tax evasion and tax evasion for allegedly constructing a long-running scheme to avoid paying millions of dollars in personal and employment taxes as related to their restaurant chain. The information alleges that the defendants not only evaded paying the taxes they owed, but that they filed income tax returns claiming they were due refunds based on the erroneous reporting of their incomes. Mattei, McGlynn, Donnelly, and Welsh are also charged with bank fraud; and McGlynn and Donnelly are also charged with aggravated structuring of financial transactions.
According to the press release, the individuals have allegedly evaded paying taxes since the restaurant was established in 1986 by, among other things, paying employees a portion of their wages with unreported cash in order to evade payroll taxes; paying suppliers with unreported cash; and having false tax returns prepared that under-reported income and falsely inflated expenses and deductions. For example, between the years 2006 and 2010, it is alleged the individuals deliberately failed to properly account for $15.6 million in gross receipts, thereby evading $2.2 million in federal employment and personal taxes.
In cases related to tax fraud and evasion, the threshold to prove willfulness is fairly low. Specifically, although an individual may not have intentionally evaded taxes, the actions and circumstances surrounding the evasion can be sufficient to warrant a finding of willful conduct. However, that is a question of fact left for a jury to decide.
Further, it is remarkable that the IRS would not catch on to such an elaborate scheme, if the individuals were in fact carrying on this activity since 1986. If, as the government alleges, millions of dollars were not being paid to the IRS, it should have caught someone’s attention much earlier, rather than 26 years later.
This case was a joint investigation between the FBI and the IRS Criminal Investigation Division. The IRS Criminal Investigation Division seems to be stepping up its efforts, as numerous criminal cases have recently resulted following an investigation by the IRS.
The author of this blog is Erich Ferrari, an attorney specializing in Federal Criminal Defense matters. If you have any questions please contact him at 202-280-6370 or email@example.com.