The owners of the venerable “Tony Luke’s” cheesesteak franchise in Philadelphia have been charged with conspiracy to defraud the Internal Revenue Service (IRS), tax evasion, and aiding and assisting in filing false tax returns.

According to the indictment, Anthony Lucidonio Sr., 82, and his son, Nicholas Lucidonio, 52, both of New Jersey, owned and operated Tony Luke’s. From 2006 through 2016, the Lucidonios allegedly hid from the IRS more than $8 million in receipts by depositing only a portion of Tony Luke’s receipts into business bank accounts and filing with the IRS false business and personal tax returns that substantially understated their income. 

Like many other sandwich shops, Tony Luke’s is a mostly cash-based business. According to the complaint, the Lucidonios “knowingly, intentionally, and deliberately failed to deposit millions of dollars” into the bank. They then allegedly gave their accountant a second set of numbers – without those cash receipts – to prepare their tax returns, including corporate and individual returns.

The feds also alleged that in 2015, after a dispute over franchising rights arose between the Lucidonios and “another individual,” the pair had their accountant amend prior-year tax returns to increase reported sales. However, they then falsely offset the increased income by inflating business expenses to keep their overall reported profits low. Since the company was a pass-through entity, the lower the income on the corporate returns, the less tax that each paid personally.

The individual involved in the franchise dispute was not named in the court records. However, Anthony Lucidonio Jr., (Tony Luke Jr.), had a famously bitter split from his brother and father in 2015. Lucidonio Jr. claimed in a lawsuit that his father and brother came to resent him as the public “face” of the company (he was heavily involved in marketing), and abruptly fired him. His father and brother also filed a lawsuit, claiming breach of contract. 

The amount allegedly concealed by the Lucidonios in the income tax scheme is, according to court records, more than $8 million.

But the reportedly bad behavior didn’t stop there.

The indictment further alleges that the Lucidonios committed employment tax fraud by paying employees a portion of their wages and salaries “on the books” for some hours they worked, but then paying additional wages for the remaining hours worked “off the books” in cash. The cash wages were paid without regard to withholding or employment taxes. From 2014 through 2015, the pair also allegedly filed false quarterly employment tax returns with the IRS substantially understating wages paid and taxes due.

And the scheme was reportedly a bit more involved than your run-of-the-mill payments under the table. According to the indictment, the Lucidonios did write paychecks but “directed that their employees endorse their paychecks and give them back to the defendants and their store managers, which defendants then redeposited into company bank accounts.” In return, the Lucidonios would then give their employees envelopes containing cash: this was in addition to the other cash wages.

In furtherance of the scheme, the Lucidonios then allegedly gave their accountant false information about the number of hours worked per employee, as well as the issuance of payroll checks. 

As a result, each of the Lucidonios, Anthony Lucidonio, Sr., is charged with one count of conspiracy, two counts of aiding and assisting in the preparation of false corporate tax returns, two counts of aiding and assisting in the preparation of false individual tax returns, 13 counts of aiding and assisting in the preparation of false employment tax returns, and two counts of tax evasion.

If convicted, the Lucidonios face a maximum sentence of five years in prison for the conspiracy charge and each count of tax evasion, and three years in prison for each false return charge. They also face a period of supervised release, restitution, and monetary penalties.

It’s a shocking twist for the Philadelphia institution. Tony Luke’s was founded in 1992 at 39 East Oregon Avenue in South Philadelphia. It took six months to add cheesesteaks on the menu, but the Philly favorite eventually became Tony Luke’s standard. Since then, Tony Luke’s has become famous not only in Philly but around the country with locations in New York City, New Jersey, Maryland and Washington, DC. Tony Luke’s global expansion didn’t entirely take off as planned: the Bahrain location has since closed. 

While tourists may flock to Tony Luke’s for the cheesesteaks, most Philly natives would recommend the shop for something else: a roast pork sandwich. I had never tried broccoli rabe before having it on a roast pork sandwich – but with garlic and provolone, it’s so good, it feels criminal (sorry, I couldn’t help myself).

Tony Luke’s has also been featured on television. The restaurant – and its owners – have appeared in numerous shows, including Throwdown with Bobby Flay (Luke won), The Travel Channel’s Man v. Food, and Food Wars.

But that media streak may be coming to an end with these latest charges.

The indictment was filed on July 21, 2020, and unsealed on July 24, 2020. According to the court docket, a hearing has not yet been set. An indictment merely alleges that crimes have been committed. The defendants are presumed innocent until proven guilty.

[*Author’s note: If you’re confused by the headline, in Philly, you always order your cheesesteak wit (with) or witout (without) the onions.]

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