When I was in law school, my friend, Madeline and I would often make the long walk to the Vet to watch the Phillies play ball. Afterward, on the walk back home, we’d swing by Nifty Fifty’s, a fifties-style diner, in the heart of South Philly, for a milkshake. It was always busy and it always smelled like coffee and onion rings. Apparently, there was a lot more cooking than that.
Last month, charges were filed against the owners and managers of the retro style restaurant chain for tax evasion. And the charges aren’t a one-off accusation. The defendants, co-owners Robert Mattei, Leo McGlynn, and Joseph Donnelly, and managers Brian F. Welsh and Elena V. Ruiz, were accused of attempting to defraud the U.S. government “from in or about 1986 to in or about October 2010.” That’s a period of about 25 years.
This week, each of the five pleaded guilty to conspiracy and tax evasion. In addition, Mattei and Welsh pleaded guilty to bank fraud and McGlynn and Donnelly also pleaded guilty to bank fraud and aggravated structuring of financial transactions.
The five had been accused of taking cash from the restaurants and falsifying documents and tax returns to make it appear that they had far less taxable income. As part of the ongoing scheme, employees and vendors were paid in cash while hundreds of thousands of dollars were hidden in the restaurants, in personal safes, and in bank safe deposit boxes.
The plan began to fall apart when the five decided to seek additional business loans at Sovereign Bank. Since they had been significantly underreporting income to the IRS and other taxing authorities, they realized that their tax records would not be sufficient to support a loan application. The solution was to falsify their tax records – this time showing more income than reported to the IRS – in order to qualify for the $2.28 million loan.
Eventually, the paperwork, schemes, and lies caught up with the defendants, who will be sentenced in September. Mattei faces up to 40 years in prison and a $1.5 million fine. McGlynn and Donnelly could each land up to 50 years in prison and a $2 million fine. Welsh could see up to 40 years in prison and a $1.5 million fine. And Ruiz could get off the easiest (relatively speaking) with a mere 10 years in prison and a $500,000 fine.
Despite the pleas, it appears that the restaurants will remain open. That eases the minds of many in the greater Philadelphia area because while they might have been liars and cheats, they made a darned good milkshake.
