Owners of Tony Luke’s Philadelphia Cheesesteak restaurant sentenced for tax fraud

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The song ‘Philadelphia Freedom’ won’t be playing anytime soon for the owners of a Philadelphia mainstay.

Two New Jersey owners of a popular South Philadelphia cheesesteak restaurant were sentenced Thursday for a decade-long conspiracy to defraud the IRS, authorities said.

The court sentenced Nicholas Lucidonio, 57, and Anthony Lucidonio Sr., 84, to 20 months in prison each.

According to court documents obtained by the Wisconsin Law Journal, and statements made in court, the Lucidonios owned and operated Tony Luke’s, a cheesesteak and sandwich restaurant located in South Philadelphia.

From 2006 to 2016, they hid from the IRS more than $8 million in cash receipts by depositing only a portion of the cash they received into Tony Luke’s business bank accounts.

The defendants further provided incomplete information to their accountant, which caused their accountant to file false tax returns that substantially underreported business receipts and income.

The Lucidonios also committed employment tax fraud by paying employees “off the books” in cash.

In an unsuccessful attempt to evade detection, they paid most employees a portion of their wages “on the books.” The Lucidonios then paid the remainder of their wages in cash without withholding federal income tax, Social Security and Medicare taxes or paying those to the IRS.

The Lucidonios failed to report these cash wages to their accountant, which caused the accountant to prepare and file false quarterly employment tax returns with the IRS, government officials said.

When a dispute over Tony Luke’s franchising rights arose between the Lucidonios and another individual in 2015, the Lucidonios became concerned that their tax fraud scheme would be revealed, so they directed that the prior year’s tax returns be amended to increase reported sales. The Lucidonios continued to hide their ongoing payroll tax scheme, officials noted.

As a result of their tax fraud scheme, the defendants caused a loss of $1,321,042 to the United States.

In addition to the terms of imprisonment, U.S. District Judge Gerald A. McHugh ordered both defendants to serve three years of supervised release.

Acting Deputy Assistant Attorney General Stuart M. Goldberg of the Justice Department’s Tax Division and U.S. Attorney Jacqueline C. Romero for the Eastern District of Pennsylvania made the announcement.

IRS Criminal Investigation investigated the case.

Acting Section Chief John Kane of the Tax Division and Assistant U.S. Attorney and Criminal Division Chief Richard Barrett for the Eastern District of Pennsylvania are prosecuting the case.