January 26, 2024
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The owners of the original Tony Luke's cheesesteak shop, at Oregon Avenue and Front Street in South Philadelphia, have been sentenced to prison for a decade-long tax fraud scheme.
The father-and-son owners of South Philly's original Tony Luke's cheesesteak shop have each been sentenced to serve 20 months in prison for a decade-long tax fraud scheme, federal prosecutors said.
The duo behind the restaurant's flagship store at Oregon Avenue and Front Street had pleaded guilty to concealing the shop's earnings and partially paying employees off the books. They avoided paying more than $1.3 million in taxes, the IRS determined.
Nicholas Lucidonio, 57, and Anthony Lucidonio Sr., 84, were both sentenced Thursday after a lengthy saga that emerged from a bitter family dispute with Anthony Lucidonio Jr., better known as Tony Luke Jr. The cheesesteak brand was splintered into an unaffiliated franchise after Tony Luke Jr. was fired from the South Philly shop in 2015. The franchising lawsuit Tony Luke Jr. filed against his father and brother brought to light details of the fraud that took place at the original location at 39 E. Oregon Ave.
The prison terms the Lucidonios will serve puts in question the future of the South Philly shop, which opened in 1992. The business has been operating as Tony & Nick's Steaks since the summer of 2022, when the Lucidonios agreed to change the name because of the negative publicity the case was creating for Tony Luke Jr.'s franchise locations.
Between 2006-2016, Tony Luke Sr. and Nicholas Lucidonio failed to deposit millions of dollars in cash to the company's business bank, federal investigators found. The scheme was aided by the fact that many of the shop's customers paid for their food in cash, prosecutors said.
Although the restaurant's actual receipts and income were tracked by the store's point-of-sale system and sent to the company's administrative offices, the Lucidonios gave their accountant information to prepare and file corporate income tax returns based on underreported income.
The Lucidonios also committed payroll tax fraud by writing checks to their employees that only represented a portion of the hours they worked. The employees were instructed to endorse their checks back to the store in exchange for receiving envelopes full of cash that reflected the true number of hours they had worked; some of the cash they received was untaxed.
In all, prosecutors said the father and son concealed more than $8 million in cash receipts between 2006-2016.
When Tony Luke Jr. sued his father and brother over franchising rights, the Lucidonios became concerned that the tax fraud would be exposed, prosecutors said. In an effort to cover their tracks, they directed their accountant to file amended corporate tax returns for 2013 and 2014. The amended returns reported more accurate sales figures, but the Lucidonios also claimed fictitious business expenses to continue the tax fraud scheme, prosecutors said.
Tony Luke Jr. was not charged in connection with the tax fraud scheme and immediately distanced himself from the South Philly shop's troubles when the indictment was handed down in 2020.
U.S. District Judge Gerald A. McHugh is still determining whether the father and son will serve their sentences back-to-back, potentially allowing them to alternate operating the restaurant while the other is in prison.
In addition to the prison terms, McHugh ordered the Lucidonios to each serve three years of supervised release and to pay the IRS $1.3 million in back taxes.
