Restaurant Chain Owners Charged with Cheating the IRS of Millions of Dollars

Local Restaurant Chain Owners Charged with Cheating the IRS of Millions of Dollars

U.S. Attorney’s Office
May 16, 2012 Eastern District of Pennsylvania
(215) 861-8200

PHILADELPHIA—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 cheated the Internal Revenue Service by failing to properly account for more than $15 million in gross receipts. The case was announced by United States Attorney Zane David Memeger, IRS Acting Special Agent in Charge Akeia Connor with the Criminal Investigation Division, and FBI Special Agent in Charge George C. Venizelos. The defendants—Mattei, 73, of Del Ray Beach, Florida; McGlynn, 52, of Swarthmore, Pennsylvania; Welsh, 48, of Springfield, Pennsylvania; Donnelly, 49, of Springfield, Pennsylvania; and Ruiz, 46, of Drexel Hill, Pennsylvania—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 information, the defendants have 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. Just between the years 2006 and 2010, it is alleged the defendants deliberately failed to properly account for $15.6 million in gross receipts, thereby evading $2.2 million in federal employment and personal taxes.

“Owning your own business is part of the American dream. But with that dream comes responsibilities, including paying your fair share of federal taxes,” said Memeger. “It is alleged that these defendants conspired to disregard their responsibilities, to the tune of over $15 million, so they could enrich themselves at the expense of all the hardworking Americans who follow the rules and pay their taxes.”

It is further alleged that in the course of their conspiracy, defendants Mattei, McGlynn, Donnelly, and Welsh committed bank fraud by submitting to the bank bogus income tax returns in order to secure several business loans; and that defendants McGlynn and Donnelly structured numerous cash deposits of undeclared income into a bank account in an effort to avoid federal reporting requirements.

“The charges announced today are the result of a lengthy and complex financial investigation involving Nifty Fifty’s restaurants,” said Acting Special Agent in Charge of IRS-Criminal Investigation Akeia Conner. “These charges summarize a scheme in which millions of dollars in income were skimmed from a successful business in order to evade paying taxes on the income. IRS-Criminal Investigation is committed to investigating these types of tax fraud schemes in order to build faith in our nation’s tax system and to ensure that everyone is paying their fair share. It is important to remember that tax evasion is not a victimless crime and the honest taxpayers suffer when others cheat the government.”

If convicted, Mattei and Welsh face a maximum sentence of 40 years of imprisonment, five years of supervised release, a fine of up to $1.5 million, full restitution to the IRS, and a $300 special assessment. If convicted, McGlynn and Donnelly face a maximum sentence of 50 years of imprisonment, five years of supervised release, a fine of up to $2 million, full restitution to the IRS, and a $400 special assessment. If convicted, Ruiz faces a maximum sentence of 10 years of imprisonment, three years of supervised release, a fine of up to $500,000, full restitution to the IRS, and a $200 special assessment.

This case was investigated by the Internal Revenue Service Criminal Investigation Division and the FBI. It is being prosecuted by Assistant United States Attorneys Paul G. Shapiro and Nancy E. Potts.

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FBI — Local Restaurant Chain Owners Charged with Cheating the IRS of Millions of Dollars