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July 24, 2020

Tony Luke's cheesesteak shop owners charged in alleged tax evasion scheme

Anthony Lucidonio Sr. and son, Nicholas, hit with federal indictment

Investigations Tax Fraud
Tony Lukes Main Google/StreetView

The owners of The Original Tony Luke's, located at Front Street and Oregon Avenue in South Philadelphia, have been charged in a tax evasion scheme that allegedly hid $8 million from the IRS between 2006 and 2016, federal prosecutors say.

Two owners of South Philadelphia's popular cheesesteak shop Tony Luke's allegedly carried out a tax evasion scheme that concealed about $8 million from the Internal Revenue Service. 

A federal indictment accuses Anthony Lucidonio Sr. and his son, Nicholas Lucidonio, of evading income taxes by concealing business receipts and income at the flagship restaurant from 2006 to 2016. It also claims they paid employees in cash off the books to evade payroll taxes.

The flagship shop, which opened at Front Street and Oregon Avenue in 1992, is independently owned and operated by Anthony Sr., Nicholas and a third person identified in court documents as Individual A. 

The South Philly restaurant is not affiliated with the Tony Luke's brand or franchise, which has locations elsewhere in Philadelphia, the surrounding area, New Jersey, Maryland, New York and Washington, D.C. With the exception of a location in Wildwood, New Jersey, all other stores have been opened by Anthony Lucidonio, Jr., who pitched the franchise venture in 2007.

    Prosecutors said the father and son deliberately failed to deposit millions of dollars in cash to the company's business bank, noting that a substantial portion of Tony Luke's customers pay in cash.

    While the restaurant's actual receipts and income were tracked by the store's POS system and sent to the company's administrative offices, the Lucidonios allegedly gave their accountant their business's bank account information to prepare and file annual corporate income tax returns.

    The indictment further alleges that the Lucidonios committed payroll tax fraud by writing checks for employees that only represented wages for a portion of their hours worked. The employees were directed to endorse their paychecks back to the Lucidonios and store managers, in exchange for receiving envelopes containing cash, prosecutors said.

    "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 federal taxes were withheld or paid over to the IRS," the indictment alleges.

    The scheme allegedly began to unravel in 2015 amid a dispute with Individual A concerning franchising rights and royalties from the Tony Luke brand.

    The Lucidonios, concerned that the dispute would bring light to the tax fraud, allegedly directed their accountant to prepare and file amended corporate tax returns for 2013 and 2014. Though these returns reported the approximate true sales and receipts based on the POS records, the Lucidonios allegedly claimed fictitious expenses to continue the tax fraud scheme, prosecutors said.

    The Lucidonios are charged with conspiracy to defraud the IRS, aiding and assisting false tax returns, tax evasion and aiding and abetting.

    Fox Rothschild LLP and Weir & Partners LLP, the attorneys representing the Lucidonios, released a statement late Friday saying the father and son plan to fight the charges. The restaurant will remain open. 

    Anthony “Tony” Lucidonio and Nicholas “Nicky” Lucidonio – the owners and operators of The Original Tony Luke’s – dispute the criminal charges filed against them on July 24 and look forward to defending themselves in court.  Tony and Nicky have fully cooperated with the government’s investigation since its outset.

    The Original Tony Luke’s will continue to serve its faithful clientele and provide gainful employment to its employees and their families.

    A bitter dispute in the Lucidonio family became public in 2016 when Anthony Sr. and Nicholas sued Anthony Lucidonio Jr. for alleged breach of contract, claiming he owed them approximately $3 million in royalties. The franchises were allowed to use the Tony Luke's name in exchange for a 15% cut of royalty and franchise fees, according to the Courier Post.

    The franchise agreement contained a no-compete clause that Tony Sr. and Nicholas claimed they didn't know was included in the deal. In the midst of the quarrel in 2015, Anthony Sr. and Nicholas stopped preparing food and spices for Anthony Jr.'s franchise locations.

    A countersuit from Anthony Jr. threatened to force Anthony Sr. and Nicholas to change the name of their Oregon Avenue and Wildwood locations, but a New Jersey judge ultimately ruled in favor of Anthony Sr. and Nicholas. Since then, Anthony Jr.'s franchise locations have not maintained the food prep and spice agreement with the original locations.

    In an Instagram post on Friday, Anthony Jr. said the tax evasion case "has nothing to do with me."