Accountant and IRS agent take position in tax evasion lawsuit

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Testimony in the tax evasion trial of three Zourdos family members on Thursday focused on what their accountant knew – and didn’t know – about the income, and how it was recorded, at their three Dippin Donuts stores.

There was some confusion between the Zourdos family, accountant Vincent J. Gilroy Jr. and a tax official about the exact nature of the daily sales calendar books that were kept in each of the stores. Gilroy testified Thursday that he did not know the calendars existed. He said the only time some of them were in his possession he had not opened them, in part because he trusted the Zourdos family.

IRS agent – Susan Johnson – said Thursday that Gilroy’s office turned over the books to her as part of an audit she conducted on the Dippin Donuts store on Black River Boulevard in 2016. Johnson has stated that she understood some of the numbers in the book, but not all of the numbers. Who informed her of some of the numbers? Johnson told the jury that she did not remember, but noted that Gilroy was the only person she had told about the Dippin Donuts audit.

The Zourdos family defense is arguing in federal court this week that Gilroy knew more about these calendars than he told the jury and his possible negligence is the reason they are now on trial on charges of tax evasion.

John, Helen and Dimitrios Zourdos, all of Rome, are accused of funneling about $ 1 million in cash sales from Dippin Donuts to themselves between 2013 and 2017 and never reporting that money to the IRS. They are accused of skimming a portion of daily sales in cash and depositing it directly into their personal bank accounts, then never informing their accountants of the deposits, resulting in erroneous tax returns.

They are all charged with one count of conspiracy to defraud the United States, seven counts of tax evasion and seven counts of aiding and assisting the filing of false corporate income tax returns, according to the tax division of the US Department of Justice. They each face at least three to five years in federal prison if convicted of the charges against them.

The prosecution is expected to complete its case at the end of the day on Friday or Monday. The jury could begin its deliberations early next week.

The 2016 audit

IRS revenue officer Susan Johnson said Thursday that she conducted an audit on Black River Boulevard Dippin Donuts in 2016, as directed by her IRS superiors. She explained to the jury that each of Dippin Donuts’ three locations – two in Rome and one in New Hartford – are their own separate entities and file separate tax returns. She said she was only auditing the Black River Boulevard store.

Johnson said she had never spoken to anyone about the Zourdos family, that their accountant – Gilroy – had been granted the authority to cooperate on behalf of the company. Johnson said Gilroy and his office have handed over all tax and financial return preparation information
statements, and that “there was no reason” to examine the personal bank accounts of the Zourdos family.

The only thing she wanted and didn’t get were the cash register tapes, Johnson said. She was told that the family did not keep the tapes, so she asked for any further daily sales records. This led Gilroy to hand over the Daily Sales Calendar books for 2014 and 2015, which were provided to him by the Zourdos family.

Gilroy testified Thursday that he was not worried about the audit because he was convinced the tax returns were airtight. He said he asked Helen Zourdos if there was anything else he should know, and Helen told him about a single employee who was being paid cash under the table for benefits.

“She said it was the only cash payment coming out,” Gilroy told the jury.

Gilroy testified that instead of cash register tapes, the Zourdos family told him “that they had books which were daily books that they kept beside the ledger that they could provide to me.”

Gilroy told the jury that he never looked at the calendars before handing them to Johnson.

“I didn’t think I needed it,” Gilroy said. “There was a confidence between us that they would match the bank deposits.”

Gilroy pointed out that he may have confused the calendars with separate sales tax books the Zourdos family gave him to calculate sales tax.

Calendar books

As several witnesses at trial have testified so far, the daily sales calendar books were kept by John, Helen and Dimitrios Zourdos in each of the three stores. On the left side of each page was the total counter and drive-thru sales for each day. In the middle of each page was the daily cash deposit amount in the company’s bank account. On the right side of each page was the daily amount of the credit card deposit to the company’s bank account, according to a testimonial.

Several witnesses pointed out this week that the sum of sales figures did not equal the sum of deposits. This cash difference is what the government accused the Zourdos family of depositing into their personal bank accounts.

Susan Johnson testified that she went through the calendar books and compared the daily cash deposits to the company’s bank accounts, as well as the credit card deposits. She told the jury that she believed the daily cash deposit amount was the total cash sales for that day.

Johnson said she didn’t know what the numbers on the left side of the page meant – the front odometer total and drive-thru sales.

“I don’t remember specifically, but I do remember thinking it was registry reads,” Johnson said.

She said she could see the sum of sales did not equal the sum of deposits, but “I thought it was a sales tax discrepancy.”

When asked by the defense attorney how she knew the number in the middle of the page was the daily cash deposit, Johnson replied that she didn’t remember. She admitted at the stand that the only person she had spoken to about the books was Gilroy, but “I don’t remember the conversation.”

Johnson said that because the daily cash deposit number matched the company’s bank account, the Dippin Donuts store passed its audit and no action was taken by the IRS at that time. Johnson told the jury that if she had known that the numbers on the left side of the page were the total number of sales and that they did not match the total number of deposits, it would have “broadened the audit” considerably and would have probably discovered the family deposits in their personal bank accounts.

Other testimony

In addition to discussing the audit, Gilroy testified at length about his tax preparation work for the Zourdos family. Gilroy said he was their accountant for about 20 years, although he only did tax returns and financial statements. Gilroy said he never had access to their bank accounts or investments.

When preparing corporate and personal income tax returns each year, Gilroy told the jury that he doesn’t always ask the Zourdos family if they’ve provided him with all the documents he needs.

“It was a guess,” Gilroy said. “We worked together for a long time. I had great faith in John and Helen. I trusted them.

Gilroy said he had previously spoken to John Zourdos about his business and said, “All sales must be deposited into the company’s bank account. Gilroy added, “If it went to another bank account, it would still be Dippin Donuts income and belong to that tax return.”

Had he known that the Zourdos family was depositing sales money into their personal bank accounts, Gilroy said, “I probably would have quit any job for them.”

Regarding Dimitrios Zourdos, Gilroy said he never spoke to Dimitrios about business matters or his personal tax return.

Two other former Dippin Donuts employees also testified on Thursday about being paid in cash for overtime worked. Like all former and current Dippin employees who have testified this week, Tyler Falcone and Kaleena Kelly have been granted court immunity from prosecution for failing to report these cash payments on their tax returns.

Falcone told the jury that she asked Helen Zourdos about the cash payments and that there was “no explanation, she just said that was how we do it”.

Falcone said she also asked Helen about tips pooled among employees.

“I was told that I didn’t have to claim tips when I started working there,” Falcone said, noting that she was making about $ 100 in tips a week.

Kelly testified that she had managerial duties at Dippin Donuts and also questioned Helen about cash payments for overtime.

“Because it saved us money on paying taxes on that money,” Kelly explained when told. “And that we would do better than the time and a half.”

Kelly and several employees testified this week that the Zourdos family paid overtime in cash to avoid having to pay the state-required time and a half for overtime on an actual paycheck. Kelly said the Zourdos family stopped paying the money once they were investigated for tax evasion.

Kelly noted that she couldn’t remember “100%” if Helen was the one who told her about money and tax savings, although “Helen was always the person I talked to. “


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