Manhattan U.S. Attorney Announces Charges Against Nine Owners Of Gourmet Food Markets For Conspiring To Hide Over $56 Million From The IRS
Preet Bharara, the United States Attorney for the Southern District of New York, and Toni Weirauch, the Acting Special Agent in Charge of the New York Field Office of the Internal Revenue Service, Criminal Investigation (“IRS-CI”), announced today the unsealing of a Superseding Indictment charging ADEM ARICI and his brother, CEVDET ARICI, OMER IPEK, ERDAL KILIC, ARMAGAN TANIR, ATILLA YAYLA, JODY VITALE, ANDREW POMA, and JOSEFINA CARABALLO – all of whom have or had ownership interests in one or more of six fine food supermarkets in New York, New Jersey, and Connecticut – with conspiring to engage in a multi-year tax fraud scheme in which they hid more than $56 million in gross receipts from federal and state tax authorities.
In addition to the conspiracy charge, all nine defendants are also charged with one count of endeavoring to obstruct and impede the due administration of the internal revenue laws. In addition, ADEM and CEVDET ARICI, IPEK, KILIC, TANIR, POMA, and CARABALLO are charged with multiple counts of subscribing to false and fraudulent federal personal income tax returns; and ADEM and CEVDET ARICI, IPEK, KILIC, TANIR, VITALE, and POMA are charged with multiple counts of aiding and assisting in the preparation of false and fraudulent federal corporate, partnership, and payroll tax returns.
Manhattan U.S. Attorney Bharara stated: “As alleged, the scheme in which Adem Arici and his codefendants engaged was a flagrant violation of multiple federal tax laws that cheated the IRS out of millions of dollars in tax revenues. They used their businesses as vehicles through which they could perpetrate their alleged crimes and will now be forced to answer for their conduct.”
Acting Special Agent in Charge Toni Weirauch stated: “IRS-Criminal Investigation seeks to foster the confidence of the public in the nation’s tax system by working to ensure that everyone pays their fair share. We are committed to uncovering and investigating all kinds of tax evasion schemes – however simple or however complex – and working with the Department of Justice to see that the perpetrators of these schemes are vigorously prosecuted.”
The following allegations are based on the Superseding Indictment unsealed yesterday in White Plains federal court:
ADEM and CEVDET ARICI, IPEK, KILIC, TANIR, YAYLA, VITALE, POMA, and CARABALLO (“the Market Owners”) each had an ownership interest and active involvement in one or more of the following fine food supermarkets (“the Markets”):
Zeytuna, also known as Idaho Farmers Market, Inc., located at 59 Maiden Lane, New York, New York.
Zeytinia Fine Food Store, also known as Oakland Fine Food, Inc., located at 350 Ramapo Valley Road, Oakland, New Jersey.
The Amish Market, also known as Potato Farms LLC, located at 53 Park Place, New York, New York.
Zeytinia Gourmet, also known as Forest Market LLC, located at 56 Maple Street, Croton-on-Hudson, New York.
Zeytinia Fine Food Store, also known as Zeytinia LLC, located at 2801 Pacific Avenue – Units 203-204, Atlantic City, New Jersey.
Zeytinia Gourmet Market, also known as Wilton Farms LLC, located at 14 Danbury Road – Suite 11, Wilton, Connecticut.
ADEM ARICI and IPEK, owned a 50 percent or more interest in each of the Markets.
The Markets’ customers paid for their purchases with either cash or credit cards. Credit card payments, and on occasion a small portion of the cash receipts, were deposited into bank accounts maintained by each of the supermarkets. The remaining cash was diverted from the books and records of the Markets and used to pay certain cash business expenses, including the Markets’ payrolls. The remaining cash was divided up among the Market Owners for their own personal use.
The Market Owners concealed their cash skimming scheme from federal and state tax authorities by: filing false federal and state corporate and partnership tax returns that understated the gross receipts of the Markets; filing false state sales tax returns that understated the sales of the Markets; filing false federal and state personal income tax returns that failed to report as income the cash skimmed from the Markets by the Market Owners; and maintaining a second set of books and other records documenting that the owners skimmed cash from each of the market locations for their own personal use.
The second set of books used to record the true income and expenses of the Markets reflect that the Markets failed to report in excess of $56 million in gross receipts during the years 2004 through 2009.
The Markets paid their management and staff through accounts maintained in the name of each particular market. The Market Owners were obligated to: withhold and pay over certain payroll taxes to the IRS; file IRS Forms 941, which are quarterly payroll tax forms that report to the IRS the income paid to employees and the taxes withheld; and file annual IRS Forms W-2 with the IRS and send a copy to each employee, reflecting the taxes withheld and salary paid during the tax year. Instead, they paid numerous employees, including undocumented foreign citizens, in cash. Moreover, the Market Owners failed to withhold and pay the withheld payroll taxes to the IRS, and caused the preparation and filing of forms that falsely and fraudulently understated the true salaries paid to employees and in many cases failed to report the salaries of employees entirely, as was documented in the second set of books.
To conceal their ownership of the Markets’ assets, the Market Owners transferred assets into the names of straw owners. Additionally, on three occasions in late 2009, several of the Market Owners met with two IRS undercover agents posing as prospective buyers of several of the Markets. During the first meeting, KILIC and ADEM ARICI told them that the Market Owners skim a substantial amount of cash, underreport income received from the Markets, and pay employees off the books. At the second meeting, ADEM ARICI, TANIR, KILIC and YAYLA told the agents that the Market Owners also skim a substantial portion of the receipts and file false tax returns, and CEVDET ARICI told them, during the third meeting, that the Market Owners skim a substantial portion of the receipts and divide the cash amongst themselves.
The Superseding Indictment also contains charges from the underlying Indictment against ADEM ARICI and his attorney, MARC E. VERZANI, alleging that they conspired to violate, and violated, the Cuba trade embargo; that VERZANI and ADEM ARICI engaged in witness tampering in connection with the investigation; and that VERZANI obstructed justice.
CEDVET ARICI and JODY VITALE were arraigned yesterday afternoon before U.S. Magistrate Judge Lisa Margaret Smith in White Plains federal court and were remanded pending satisfaction of bail conditions, a $250,000 personal recognizance bond secured by $100,000 and two responsible co-signers for ARICI and a $200,000 personal recognizance bond secured by two responsible co-signers for VITALE. The case has been assigned to U.S. District Judge Cathy Seibel, who set a hearing for August 16, 2012, at 11 a.m.
* * *
ADEM ARICI and IPEK each face a maximum sentence of 27 years in prison, CARABALLO faces a maximum sentence of 20 years in prison, KILIC, TANIR, POMA, and CEVDET ARICI each face a maximum sentence of nine years in prison, YAYLA faces a maximum sentence of eight years in prison, and VITALE faces a maximum sentence of six years in prison. Charts containing a breakdown of the maximum penalties for each of the charged offenses, as well as age and residency information for the defendants are attached to this release.
Mr. Bharara praised the outstanding efforts of IRS-CI in the investigation. He also thanked the U.S. Immigration and Customs Enforcement’s Homeland Security Investigations and the U.S. Department of Justice’s Tax Division for its significant assistance in the investigation.
This case is being handled by the Office’s White Plains Division. Assistant U.S. Attorneys Perry A. Carbone and Lee Renzin are in charge of the prosecution.
The charges and allegations contained in the Indictment are merely accusations, and the defendants are presumed innocent unless and until proven guilty.
In addition to the conspiracy charge, all nine defendants are also charged with one count of endeavoring to obstruct and impede the due administration of the internal revenue laws. In addition, ADEM and CEVDET ARICI, IPEK, KILIC, TANIR, POMA, and CARABALLO are charged with multiple counts of subscribing to false and fraudulent federal personal income tax returns; and ADEM and CEVDET ARICI, IPEK, KILIC, TANIR, VITALE, and POMA are charged with multiple counts of aiding and assisting in the preparation of false and fraudulent federal corporate, partnership, and payroll tax returns.
Manhattan U.S. Attorney Bharara stated: “As alleged, the scheme in which Adem Arici and his codefendants engaged was a flagrant violation of multiple federal tax laws that cheated the IRS out of millions of dollars in tax revenues. They used their businesses as vehicles through which they could perpetrate their alleged crimes and will now be forced to answer for their conduct.”
Acting Special Agent in Charge Toni Weirauch stated: “IRS-Criminal Investigation seeks to foster the confidence of the public in the nation’s tax system by working to ensure that everyone pays their fair share. We are committed to uncovering and investigating all kinds of tax evasion schemes – however simple or however complex – and working with the Department of Justice to see that the perpetrators of these schemes are vigorously prosecuted.”
The following allegations are based on the Superseding Indictment unsealed yesterday in White Plains federal court:
ADEM and CEVDET ARICI, IPEK, KILIC, TANIR, YAYLA, VITALE, POMA, and CARABALLO (“the Market Owners”) each had an ownership interest and active involvement in one or more of the following fine food supermarkets (“the Markets”):
Zeytuna, also known as Idaho Farmers Market, Inc., located at 59 Maiden Lane, New York, New York.
Zeytinia Fine Food Store, also known as Oakland Fine Food, Inc., located at 350 Ramapo Valley Road, Oakland, New Jersey.
The Amish Market, also known as Potato Farms LLC, located at 53 Park Place, New York, New York.
Zeytinia Gourmet, also known as Forest Market LLC, located at 56 Maple Street, Croton-on-Hudson, New York.
Zeytinia Fine Food Store, also known as Zeytinia LLC, located at 2801 Pacific Avenue – Units 203-204, Atlantic City, New Jersey.
Zeytinia Gourmet Market, also known as Wilton Farms LLC, located at 14 Danbury Road – Suite 11, Wilton, Connecticut.
ADEM ARICI and IPEK, owned a 50 percent or more interest in each of the Markets.
The Markets’ customers paid for their purchases with either cash or credit cards. Credit card payments, and on occasion a small portion of the cash receipts, were deposited into bank accounts maintained by each of the supermarkets. The remaining cash was diverted from the books and records of the Markets and used to pay certain cash business expenses, including the Markets’ payrolls. The remaining cash was divided up among the Market Owners for their own personal use.
The Market Owners concealed their cash skimming scheme from federal and state tax authorities by: filing false federal and state corporate and partnership tax returns that understated the gross receipts of the Markets; filing false state sales tax returns that understated the sales of the Markets; filing false federal and state personal income tax returns that failed to report as income the cash skimmed from the Markets by the Market Owners; and maintaining a second set of books and other records documenting that the owners skimmed cash from each of the market locations for their own personal use.
The second set of books used to record the true income and expenses of the Markets reflect that the Markets failed to report in excess of $56 million in gross receipts during the years 2004 through 2009.
The Markets paid their management and staff through accounts maintained in the name of each particular market. The Market Owners were obligated to: withhold and pay over certain payroll taxes to the IRS; file IRS Forms 941, which are quarterly payroll tax forms that report to the IRS the income paid to employees and the taxes withheld; and file annual IRS Forms W-2 with the IRS and send a copy to each employee, reflecting the taxes withheld and salary paid during the tax year. Instead, they paid numerous employees, including undocumented foreign citizens, in cash. Moreover, the Market Owners failed to withhold and pay the withheld payroll taxes to the IRS, and caused the preparation and filing of forms that falsely and fraudulently understated the true salaries paid to employees and in many cases failed to report the salaries of employees entirely, as was documented in the second set of books.
To conceal their ownership of the Markets’ assets, the Market Owners transferred assets into the names of straw owners. Additionally, on three occasions in late 2009, several of the Market Owners met with two IRS undercover agents posing as prospective buyers of several of the Markets. During the first meeting, KILIC and ADEM ARICI told them that the Market Owners skim a substantial amount of cash, underreport income received from the Markets, and pay employees off the books. At the second meeting, ADEM ARICI, TANIR, KILIC and YAYLA told the agents that the Market Owners also skim a substantial portion of the receipts and file false tax returns, and CEVDET ARICI told them, during the third meeting, that the Market Owners skim a substantial portion of the receipts and divide the cash amongst themselves.
The Superseding Indictment also contains charges from the underlying Indictment against ADEM ARICI and his attorney, MARC E. VERZANI, alleging that they conspired to violate, and violated, the Cuba trade embargo; that VERZANI and ADEM ARICI engaged in witness tampering in connection with the investigation; and that VERZANI obstructed justice.
CEDVET ARICI and JODY VITALE were arraigned yesterday afternoon before U.S. Magistrate Judge Lisa Margaret Smith in White Plains federal court and were remanded pending satisfaction of bail conditions, a $250,000 personal recognizance bond secured by $100,000 and two responsible co-signers for ARICI and a $200,000 personal recognizance bond secured by two responsible co-signers for VITALE. The case has been assigned to U.S. District Judge Cathy Seibel, who set a hearing for August 16, 2012, at 11 a.m.
* * *
ADEM ARICI and IPEK each face a maximum sentence of 27 years in prison, CARABALLO faces a maximum sentence of 20 years in prison, KILIC, TANIR, POMA, and CEVDET ARICI each face a maximum sentence of nine years in prison, YAYLA faces a maximum sentence of eight years in prison, and VITALE faces a maximum sentence of six years in prison. Charts containing a breakdown of the maximum penalties for each of the charged offenses, as well as age and residency information for the defendants are attached to this release.
Mr. Bharara praised the outstanding efforts of IRS-CI in the investigation. He also thanked the U.S. Immigration and Customs Enforcement’s Homeland Security Investigations and the U.S. Department of Justice’s Tax Division for its significant assistance in the investigation.
This case is being handled by the Office’s White Plains Division. Assistant U.S. Attorneys Perry A. Carbone and Lee Renzin are in charge of the prosecution.
The charges and allegations contained in the Indictment are merely accusations, and the defendants are presumed innocent unless and until proven guilty.
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