Case Document 1 Filed 07/21/20 Page 1 of 18 IN THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF UNITED STATES OF AMERICA CRIMINAL NODATE FILED: 7/21/20 ANTHONY LUCIDONIO, SR. - VIOLATIONS: NICHOLAS LUCIDONIO 18 U.S.C. 371 (conspiracy to defraud 1 count) 26 U.S.C. 7206(2) (aiding/assisting false tax returns - 19 counts) 26 U.S.C 7201 (tax evasion 4 counts) 18 U.S.C. 2 (aiding and abetting) INDICTMENT COUNT ONE (Conspiracy to Defraud the United States) 18 U.S.C. 371) THE GRAND JURY CHARGES THAT: At times material to this Indictment: Introduction 1. Defendant ANTHONY LUCIDONIO, SR. resided in New Jersey. 2. Defendant NICHOLAS LUCID ONIO, son of defendant ANTHONY LUCIDONIO, SR., resided in New Jersey. 3. Tony Luke, Inc. (?Tony Luke?), a corporation, was a well-known and popular cheesesteak sandwich restaurant doing business as Tony Luke?s and located at 39 East Oregon Avenue in South Philadelphia. Founded in 1992 by defendant ANTHONY 1 Case Document 1 Filed 07/21/20 Page 2 of 18 LUCID ONIO, SR., Tony Luke sold sandwiches, beverages, and other menu items. Defendant ANTHONY LUCIDONIO, SR. owned 90 percent of Tony Luke, while defendant NICHOLAS LUCIDONIO and Individual A, a person known to the grand jury, each owned 5 percent. The named defendants managed the day-to-day Operations of Tony Luke. 4. Tony Luke?s Commissary, Inc. (?Tony Luke?s Commissary?), a corporation, was an entity that held Tony Luke?s administrative and corporate of?ces, purchased food supplies, and prepared the food for delivery to the Tony Luke?s restaurant. Defendant ANTHONY LUCIDONIO, SR. owned 90 percent of Tony Luke?s Commissary, while defendant NICHOLAS LUCIDONIO and Individual A owned 5 percent each. 5. The Internal Revenue Service was an agency of the United States Department of the Treasury responsible for enforcing and administering the tax laws of the United States. 6. In order to accurately assess and collect taxes, the IRS must, among otherlthings, determine taxpayers? actual income, credits, and deductions. To help ful?ll the mission, the tax laws of the United States require taxpayers to ?le tax returns and forms, including, among others: a. Form 1040: US. Individual Income Tax Return, Form 1040 (?Form 1040?), and related IRS Schedules and Forms, is a type of annual tax return used by individual taxpayers to report their income, any allowable deductions, and tax liability; b. Form 11203: US. Income Tax Return for an Corporation, Form 11208 (?Form 11205?), is a type of annual information return used by corporate Case Document 1 Filed 07/21/20 Page 3 of 18 corporations, to report receipts, expenses, and business income. corporations do not themselves have tax liability for net business income reportable on Form 1120S. Instead, an corporation owner(s) reports any net business income from the corporation on Forms 11203 as well as ??ow through? income on the owner?s Form 1040, where it is taxed as individual income; c. Form 941: Employer?s Quarterly Federal Tax Return, Form 941 (?Form 941?), is a?type of tax return used by employers. Employers must withhold, account for, and pay over to the IRS certain taxes from employee wages, including federal income taxes, Medicare taxes, and Social Security taxes, and must further account for and pay over their own share of such taxes based upon total wages they pay (collectively ?payroll taxes? or ?employment taxes?). To account for such payroll taxes, employers must prepare and submit Forms, 941, among other forms, disclosing all wages paid, taxes withheld, and payroll taxes due and owing. Defendants? Tax Fraud Scheme 7. From at least in or about 2006 to in or about 2016, defendants ANTHONY LUCIDONIO, SR. and NICHOLAS LUCIDONIO engaged in a scheme to defraud the United States Treasury by: (1) concealing business receipts and income of Tony Luke to evade income taxes; and (2) paying employees in cash ?off the books? to evade payroll taxes. Income Tax Fraud 8. A substantial portion of Tony Luke?s customers paid in cash. Case Document 1 Filed 07/21/20 Page 4 of 18 9. Defendants ANTHONY LUCIDONIO, SR. and NICHOLAS LUCIDONIO caused to be opened business bank accounts at Bank A, titled in the nameof Tony Luke, to deposit credit card and cash sales. 10. Defendants ANTHONY LUCIDONIO, SR. and NICHOLAS LUCIDONIO, while depositing a portion of their cash receipts, knowingly, intentionally, and deliberately failed to deposit millions of dollars in additional cash receipts into the company?s business bank accounts. Such accounts therefore did not contain a true accounting of Tony Luke?s receipts and income. 11. Defendants ANTHONY LUCIDONIO, SR. and NICHOLAS LUCIDONIO tracked Tony Luke?s true receipts and income by using a point of sale system at its counter registers that computed all daily credit card and cash sales. - Daily POS printouts were delivered to the company?s administrative of?ces at Tony Luke?s Commissary, where the defendants caused the true sales and income of the business to be recorded in a separate set of books and records. 12. Defendants ANTHONY LUCID ONIO, SR. and NICHOLAS LUCIDONIO retained a Certi?ed Public Accountant (the ?accountant?) to prepare and ?le the annual corporate income tax returns for Tony Luke. To prepare the. returns, defendants provided the accountant with the business?s bank account information, knowing that such information failed to account for millions in un?deposited cash receipts. Defendants failed to provide the accountant the POS daily sales records and the second set of books and records re?ecting true receipts and income. 13. Defendants ANTHONY LUCIDONIO, SR. and NICHOLAS LUCIDONIO caused the accountant to prepare and ?le with the IRS false and fraudulent corporate tax returns, Case Document 1 Filed 07/21/20 Page 5 of 18 Forms 11208, for Tony Luke, that, among other items, fraudulently and substantially underreported the gross receipts and ordinary business income of Tony Luke. 14. Defendants ANTHONY LUCIDONIO, SR. and NICHOLAS LUCIDONIO also retained the accountant to prepare their individual tax returns. To further advance their tax fraud scheme, defendants caused the accountant to prepare and ?le with the IRS false and fraudulent individual income tax returns, Forms 1040, that, among other things, fraudulently understated the ?ow-through income from an corporation that they received as Tony Luke?s owners. 15. In or about 2015, disputes concerning franchising rights and royalties from the Tony Luke brand arose between the defendants ANTHONY LUCIDONIO, SR. and NICHOLAS LUCIDONIO, and Individual A. 16. Concerned that their tax ?aud scheme would be revealed because of their disputes with Individual A, defendants ANTHONY LUCIDONIO, SR. and NICHOLAS LUCID ONTO, to cover up their scheme, in or about 2016, caused the accountant to prepare and ?le amended . corporate tax returns, Forms 11208, for Tony Luke for the 2013 and 2014 tax years. The amended returns, unlike the initial returns, reported the approximate true sales and receipts based on POS records. However, at the same time, defendants caused to be fraudulently claimed and characterized substantial additional, but false and ?ctitious, cost of goods sold expenses to continue their tax fraud scheme. 17. As a result of their income tax fraud scheme, defendants ANTHONY LUCIDONIO, SR. and NICHOLAS LUCIDONIO fraudulently concealed from the IRS more than approximately $8 million in gross receipts earned by Tonyr Luke. Case Document 1 Filed 07/21/20 Page 6 of 18 Payroll Tax Fraud 18. As owners and operators of Tony Luke and Tony Luke?s Commissary, defendants ANTHONY LUCIDONIO, SR. and NICHOLAS LUCIDONIO were responsible persons for collecting, truthfully accounting for, and paying over federal payroll taxes with respect to employees. 19. To conceal wages, defendants ANTHONY LUCIDONIO, SR. and NICHOLAS LUCIDONIO paid a signi?cant number of their employees ?off?the-books? in cash, failing to withhold, account for, and pay over the required payroll taxes. . 20. To evade detection, defendants ANTHONY LUCIDONIO, SR. and NICHOLAS LUCIDONIO paid a portion of wages to employees ?on the books}; On payday, defendants caused to be handed out paychecks that re?ected a portion of the employees? hourly wages with the required taxes withheld. However, the wages defendants paid and reported in this fashion represented but a fraction of the true hours the employees worked, and but a fraction of the total wages that the defendants paid them. 21. In furtherance of their tax fraud scheme, defendants ANTHONY LUCID ONIO, SR. and NICHOLAS LUCIDONIO directed that their employees endorse their paychecks and give them back to the defendants and their store managers, which defendants then redeposited into company bank accounts. 22. In exchange for return of the endorsed payroll checks, defendants ANTHONY LUCIDONIO, SR. and NICHOLAS LUCIDONIO provided their employees envelopes containing cash. The cash provided included not only the net amount of their paycheck after taxes, but substantial additional cash wages for the additional hours they worked for which no Case Document 1 Filed 07/21/20 Page 7 of 18 federal taxes were withheld or paid over to the IRS. For example, while some employees may have worked as many as 50 hours a week or more, only 25 hours would be paid ?on the books? with taxes withheld, and 25 hours would be paid in additional cash ?off the books? for which no taxes were Withheld. 23. To further advance their tax fraud scheme, defendants ANTHONY LUCIDONIO, SR. and NICHOLAS LUCIDONIO provided to their accountant false and fraudulent information concerning hours worked by each employee for the preparation and issuance of Weekly payroll checks to each employee. 24. By substantially understating the hours each employee worked, defendants ANTHONY LUCIDONIO, SR. and NICHOLAS LUCIDONIO caused their accountant to substantially understate the wages paid to the employees of Tony Luke and Tony Luke?s Commissary, and the payroll taxes due and owing to the United States, causing their accountant to prepare and ?le with the IRS false and ?audulent employment tax returns, Forms 941. THE CONSPIRACY 25. From in or about 2006 and continuing through in or about 2016, in the Eastern District of and elsewhere, defendants, ANTHONY LUCIDONIO, SR. and NICHOLAS LUCIDONIO did unlawfully, voluntarily, intentionally and knowingly conspire, combine, confederate, and agree together and with each other, and with others known and unknown to the Grand Jury, to defraud the United States for the purpose of impeding, impairing, obstructing, and defeating the lawful Government functions of the Internal Revenue Service of the Treasury Department: in the Case Document 1 Filed 07/21/20 Page 8 of 18 ascertainment, computation, assessment, and collection of the revenue: to wit, federal income taxes and payroll taxes. MANNER AND MEANS It was part, and in ?ntherance, of the conspiracy that defendants ANTHONY LUCIDONIO, SR. and NICHOLAS LUCIDONIO: 26. Concealed millions in gross sales and receipts of Tony Luke by, among other things, depositing only a portion of cash sales into company bank accounts. 27. Provided their accountant with Tony Luke?s bank accounts re?ecting just a portion of cash sales, and failed to provide to their accountant other books and records kept by the defendants re?ecting true business receipts and sales. 28. Caused employees of Tony Luke and Tony Luke?s Commissary to be paid substantial cash wages ?off the books? without withholding the required payroll taxes from these wages, truthfully accounting for these wages on Forms 941, and paying payroll taxes over to the IRS. 29. Caused to be prepared and ?led with the IRS false and fraudulent corporate tax returns, Forms 11208, that, among other things, fraudulently understated Tony Luke?s gross receipts and ordinary business income. 30. Caused to be prepared and filed with the IRS false and ?audulent individual tax returns, Forms 1040, that fraudulently understated their ?ow-through income from an corporation, and taxes due and owing to the United States. 31. Caused to be prepared and ?led with the IRS false and fraudulent employment tax returns, Forms 941, which fraudulently understated total wages paid and payroll taxes owed. Case Document 1 Filed 07/21/20 Page 9 of 18 OVERT ACTS . In furtherance of the conspiracy, defendants ANTHONY LUCIDONIO, SR. and NICHOLAS LUCIDONIO committed the following overt acts, among others, in the Eastern District of and elsewhere: 1 1. Defendants ANTHONY LUCIDONIO, SR. and NICHOLAS LUCIDONIO caused to be ?led with the IRS false and fraudulent corporate tax returns, Forms 11208, for Tony Luke that, among other things, underreported gross receipts, as follows, each ?ling constituting a separate overt act: a. On or about April 15, 2007, the ?ling of Tony Luke?s 2006 Form 11208. b. On or about April 9, 2009, the ?ling of Tony Luke?s 2008 Form 11208. c. On or about April 14, 2010, the ?ling of Tony Luke?s 2009 Form 11208. d. On or about April 16, 2012, the ?ling of Tony Luke?s 2011 Form 11208. e. On or about April 14, 2014, the ?ling of Tony Luke?s 2013 Form 11208. f. On or about April 14, 2015, the ?ling of Tony Luke?s 2014 Form 11208. 2. Defendants ANTHONY LUCID ONIO, SR. and NICHOLAS LUCIDONIO caused to be ?led with the IRS false and fraudulent individual tax returns, Forms 1040, that underreported their respective ?ow-through income ?om an corporation, as follows, each ?ling constituting a separate overt act: L-1i'Acgtj1j1; 111': 1 11?; 1 11 a. Anthony Lucidonio, Sr. 201 1 10/1 1/2012 b. Nicholas Lucidonio 201 1 9/19/2012 0. Anthony Lucidonio, Sr. 2013 10/14/2014 d. Nicholas Lucidonio 2013 9/29/2014 e. Anthony Lucidonio, Sr. 2014 10/15/2015 f. Nicholas Lucidonio 2014 7/9/2015 9 Case Document 1 Filed 07/21/20 Page 10 of 18 3. Defendants ANTHONY LUCIDONIO, SR. and NICHOLAS LUCIDONIO caused to be ?led with the IRS false and fraudulent employer tax returns, Forms 941, for Tony Luke and Tony Luke?s Commissary that, among other things, underreported wages paid and taxes due as follows, each ?ling constituting a separate overt act: ?ver? F?eTForni?41 r~?Faxii?eriod ??teF?ed "_Act? L. a. Ton Luke 3Q: 2013 4/30/2013 b. Tony Luke?s Commissary 3Q: 2013 4/3 0/2013 0. Tony Luke 2Q: 2014 7/31/2014 d. Tony Luke?s Commissary 2Q: 2014 7/31/2014 6. Tony Luke 3Q: 2014 10/31/2014 f. Tony Luke?s Commissary 3 Q: 2014 10/31/2014 g. Tony Luke 2Q: 2015 7/31/2015 h. Tony Luke?s Commissary 2Q: 2015 7/31/2015 i. Tony Luke 3Q: 2015 10/31/2015 j. Tony Luke?s Commissary 3Q: 2015 10/31/2015 k. Tony Luke 4Q: 2015 1/31/2016 1. Tony Luke?s Commissary 4Q: 2015 1/31/2016 A11 in violation of Title 18, United States Code, Section 371. 10 Case Document 1 Filed 07/21/20 Page 11 of 18 COUNTS TWO AND THREE (Aiding/Assisting False Corporate Tax Returns) 26 U.S.C. 7206(2) THE GRAND JURY FURTHER CHARGES THAT: 1. Paragraphs 1 through 17 of Count One are incorporated here. 2. On or about the dates set forth below, in the Eastern District of and elsewhere, defendants, ANTHONY LUCIDONIO SR., and NICHOLAS LUCIDONIO did willfully aid and assist in, and procure, counsel, and advise the preparation and presentation to the Internal Revenue Service, of US. Income Tax Returns for an Corporation, Forms 11208, of Tony Luke, for the calendar years speci?ed below. The tax returns were false and fraudulent as to material matters, in that the said returns, among other false items, substantially understated Tony Luke?s gross receipts and ordinary business income, as further speci?ed below, whereas, as defendants ANTHONY LUCIDONIO, SR. and NICHOLAS LUCIDONIO then and there knew, Tony Luke received substantially more gross receipts and ordinary business income than the defendants caused to be reported on Forms 11208: (joint "Tastt?rn? 'Tai ?ateFied ?FalseItem(S)I ?1 Period i _i 1 a. Line 1: gross receipts, Tony Luke $2,889,234 2 Form 1120S 2013 4/14/2014 b. Line 21: ordinary business income, $112,621 a. Line 1: gross receipts, Tony Luke $3,123,929 3 Form 11208 2014 4/14/2015 b. Line 21: ordinary business income, $286,123 . In violation of Title 26, United States Code, Section 7206(2). 1 1 Case Document 1 Filed 07/21/20 Page 12 of 18 COUNTS FOUR THROUGH SEVEN (Aiding/Assisting False Individual Tax Returns) . 26 U.S.C. 7206(2) THE GRAND JURY FURTHER CHARGES THAT: 1. Paragraphs 1 through 17 of Count One are incorporated here. 2. On or about the dates set forth below, in the Eastern District of and elsewhere, defendants ANTHONY LUCIDONIO SR., and NICHOLAS LUCIDONIO did willfully aid and assist in, and procure, counsel, and advise the preparation and presentation to the Internal Revenue Service, of U.S. Individual Income Tax Returns, Forms 1040, of the defendants for the calendar years speci?ed below. The tax returns were false and fraudulent as to material matters, in that the said returns, among other false items, substantially understated income from corporations, as further specified below; whereas, as defendants ANTHONY LUCID ONIO, SR. and NICHOLAS LUCIDONIO then and there knew, they received substantially more income ?orn corporations than they caused to be disclosed and reported on Forms 1040: Grunt TaxReturnT V?Ta?x - -- EateFllEd? *Talse Item(s) \Permd ,(ApprOX), a. Line 17: income from rental real estate, royalties, 4 Anthorlior?ldigigno Sr 2013 10/ 14/2014 partnerships, corporations, . trusts, etc., $247,713 a. Line 17: income from Form 1040 rental real estate, royalties, 5 Anthony Lucidonio, Sr. 2014 partnerships, corporations, trusts, etc., 12 Case Document 1 Filed 07/21/20 Page 13 of 18 2? .: jittr?j?i i "wit: f5? Li'?Quiit'f in: .33 "Taidketurn? 1::l Tax i .2. ??lil?l?tg??ilhdif? IriQAPPFOX . 433.. pt! JJVW-ixnuu - Bahamian; a. Line 7: income from rental real estate, royalties, partnerships, corporations, trusts, etc., Form 1040 Nicholas Lucidonio . 2013 9/29/2014 a. Line 17: income from Form 1040 rental real estate, royalties, 7 Nicholas Lucidonio 2014 7/9/2015 partnerships, corporations, trusts, etc., $42,754 In Violation of Title 26, United States Code, Section 7206(2). 13 Case Document 1 Filed 07/21/20 Page 14 of 18 COUNTS EIGHT THROUGH TWENTY (Aiding/Assisting False Employment Tax Returns) 26 U.S.C. 7206(2) THE GRAND JURY FURTHER CHARGES THAT: 1. Paragraphs 1 through 7, and 18 through 24 of Count One, are incorporated here. 2. On or about the dates set forth below, in the Eastern District of and elsewhere, defendants ANTHONY LUCIDONIO, SR. and NICHOLAS LUCIDONIO did willfully aid and assist in, and procure, counsel,land advise the preparation and presentation to the Internal Revenue Service, of Employer?s Quarterly Federal Tax Returns, Forms 941, of Tony Luke and Tony Luke?s Commissary, for the calendar years and quarters speci?ed below. The tax returns were false and fraudulent as to material matters, in that the said returns, among other false items, substantially understated the total wages, paid to employees, and the total taxes due and owing as further speci?ed below, whereas, as defendants ANTHONY LUCIDONIO, SR. and NICHOLAS LUCIDONIO then and there knew, Tony Luke and Tony Luke?s Commissary paid more wages and owed more taxes than the defendants disclosed and reported on Forms 941: Count Taiifieturn TEX DateFlleid Falserfemo)? ~23 Permct 3 (Approx) a. Line 2: wages paid, 8 $2211 194:1; 2Q: 2014 7/31/2014 $131,821 b. Line 10: total taxes, $43,157 a. Line 2: wages paid, 9 2013131116 3Q: 2014 10/31/2014 $138,718 0 b. Line 10: total taxes, $46,459 Form 941 . a. Line 2: wages paid, 10 Tony Luke 4Q. 2014 1/31/2015 $120,693 14 Case Document 1 Filed 07/21/20 Page 15 of 18 7777:?" 'Coimt Tax {Return 9 Tail: 1Date ?led 1 =?Falseiltem(s) 1. i jt- 111,1 3? (prprOXL1ne 10: total taxes, $38, 610 a. Line 2: Wages paid, 11 $231133: 1Q: 2015 4/30/2015 $103,986 b. Line 10: total taxes, $36,492 Form 941 a. Line 2: wages paid, $86,187 12 Tony Luke 2Q 2015 "31/2015 b. Line 10: total taxes, $26,325 Form 941 . a. Line 2: wages paid, $83,539 13 Tony Luke 2015 1081/2015 b. Line 10: total taxes, $19,711 Form 941 a. Line 2: wages paid, $77,578 14 Tony Luke 2015 1/31/2016 b. L_ine 10: total taxes, $18,263 Form 941 a. Line 2: wages paid, $86,908 15 Tony Luke?s 2Q: 2014 7/31/2014 b. Line 10: total taxes, $33,419 Commissary - Form 941 a. Line 2: wages paid, $92,006 16 Tony Luke?s 3Q: 2014 10/31/2014 b. Line 10: total taxes, $36,760 Commissary Form 941 a. Line 2: wages paid, $85,946 17 Tony Luke?s 1Q: 2015 4/3 0/2015 . b. Line 10: total taxes, $33,793 Commissary Form 941 a. Line 2: wages paid, $89,267 18 Tony Luke?s 2Q: 2015 7/31/2015 b. Line 10: total taxes, $36,016 Commissary Form 941 a. Line 2: wages paid, 19 Tony Luke?s 3Q: 2015 10/31/2015 $102,293 Commissary b. Line 10: total taxes, $40,205 Form 941 a. Line 2: wages paid, $90,242 20 Tony Luke?s 4Q: 2015 1/31/2016 b. Line 10: total taxes, $32,113 Commissary In violation of Title 26, United States Code, Section 7206(2). 15 Case Document 1 Filed 07/21/20 Page 16 of 18 COUNTS TWENTY-ONE THROUGH (Tax Evasion) 26 U.S.C. 7201 THE GRAND JURY FURTHER CHARGES THAT: 1. Paragraphs 1 through 17 of Count One are incorporated here. 2. From in or about January of each tax year speci?ed below through in or about the date each tax return was ?led in the following year as speci?ed below, in the Eastern District of and elsewhere, defendants ANTHONY LUCIDONIO SR., and NICHOLAS LUCIDONIO did willfully attempt to evade and defeat substantial individual income taxes due and owing by the defendants to the United States of America, for each of the tax years speci?ed below, by committing, and causing to be committed, the following af?rmative acts, among others: causing to be deposited only portions of Tony Luke?s cash receipts into the company?s bank accounts; providing their accountant incomplete and misleading information concerning gross receipts, income, and expenses; (0) causing to be prepared and ?led false and fraudulent corporate income tax returns, Forms 11208; causing to be prepared and ?led false and fraudulent individual income tax returns, Forms 1040: rC'tilun?t F"?lialth?ih?ll? I?gomefTaX LlabIhty *1 ,1 1 1 31:; no 21 2013 Anthoig? ?31110, SI. 10/9/2014 22 2014 Antho?;??igigio, Sr. 4/14/2015 23 2013 NichPoliIsnthitigonio 9/23/2014 24 2014 7/9/2015 16 Case Document 1 Filed 07/21/20 Page 17 of 18 In violation of Title 26, United States Code, Section 7201, and Title 18, United States Code, Section 2. A TRUE BILL FOREPERS ON ILLIAMM I United States Attorney Eastern District of 17 Case Document 1 Filed 07/21/20 Page 18 of 18 UNITED STATES DISTRICT COURT Eastern District of Criminal Division THE UNITED STATES OF ANIERICA VS. ANTHONY LUCIDONIO, SR., and NICHOLAS LUCIDONIO INDICTMENT 18 U.S.C. 371 (conspiracy to defraud ?1 count); 26 U.S.C. 7206(2) (aiding/assisting false tax returns - 19 counts); 26 U.S.C 7201 (tax evasion 4 counts); 18 U.S.C. 2 (aiding and abetting) A true bill. Foreman Filed in open court this day, Of AD. 20 Clerk Bail,