A family which for 40 years has run a popular eatery – Nick’s Famous Roast Beef – in a city north of Boston, has been charged by the Internal Revenue Service with hiding more than $1 million a year in cash to avoid taxes.
The IRS said that Nicholas Koudanis, 65, and his wife Beverly, 60, had some $1,635,658 in cash stashed in a safe in their home in nearby Topsfield, and that their son helped them in a conspiracy to defraud, according to an indictment against them, the Boston Business Journal and Boston Globe reported.
The allegations are that the family, with the assistance of Nick Markos, skimmed the money from the cash-only business in a backroom and split it up while the husband and wife tucked it away for the last six years. The charges include that they doctored tax returns to hide their criminal activity.
Steven Koudanis, 39, of Peabody, was charged with endeavoring to obstruct and impede the due administration of the Internal Revenue Laws.
The lawyers representing Nick Koudanis and Eleni Koudanis, Robert Weinberg and Robert Goldstein, said in a joint statement via email: “Nicholas and Eleni Koudanis each clearly asserted in court (Monday) that they were not guilty while denying the tax allegations brought against them. These tax charges are just allegations — not proof, not evidence. Mr. and Mrs. Koudanis are presumed innocent and each intends to strongly contest the current claims.”
Lawyers for Markos and Steven Koudanis couldn’t be reached for comment.
The IRS said the family would report an amount far less than the actual total as revenue for the cash-only business, a common practice in Greece where tax cheats often go uncaught and lightly punished when they are, rarely going to jail.
The government alleges Nick Koudanis and Markos also paid some vendors and employees in cash to reduce their tax costs.
The indictment states that over six years, Nick Koudanis and Markos “diverted approximately $5.9 million in cash from Nick’s to themselves, their wives and their employees.”
Nick and Eleni Koudanis avoided paying $992,821 in federal taxes, the indictment alleges, and Markos avoided paying $1 million in federal taxes.
Steven Koudanis is accused by the government of “creating false cash register receipts in amounts generally consistent with the cash deposited to Nick’s bank accounts, for the purpose of being used in any audit by tax authorities.”
The charge of conspiracy to defraude carries a maximum penalty of five years in prison and a fine of $250,000; each tax charge carries a sentence of up to three years in prison and a fine of $250,000.
The business hit the 40-year milestone this year and has built a loyal clientele for its sandwiches and late hours of operation, up to 10PM and sometimes later.
Photos throughout the restaurant depict tourists holding their “Nick’s Roast Beef” bumper sticker at locales ranging from Mt. Everest to the Sydney Opera House, Forbes magazine reported.
An IRS audit in 2013 showed sales of about $1 million when the government claims that it was really over $2.3 million. There were similar ratios of real income versus the alleged doctored amounts in other years.
Joel Androphy, a defense attorney not involved with this case told Forbes that the Federal government can easily target small businesses that tend to be less sophisticated in their business practices and financial controls.
“Businesses like this are low hanging fruit for prosecutors,” Androphy said, “which is a shame because large corporations are skating around paying taxes because of the inefficiency of the IRS Whistleblower program.
The charges, in the case of Nick’s filing false tax returns and obstruction, do not carry long prison terms, but prosecutors are known for adding more charges later in order to pressure defendants into a guilty plea, the magazine said.
In cases involving large amounts of cash, that could mean money laundering charges and that could lead to more than a decade in prison. “Nobody should cheat,” Androphy said, “but the rich and large corporations can fight the government in a way the small businessman cannot.”
Cash-based businesses face tighter looks from the IRS than do large corporations with legions of lawyers to defend them.
Nick’s is a popular spot for its roast beef sandwiches and a gathering spot for a wide array of customers, including cops, firefighters, doctors, and others.