Owner Of Gourmet Food Markets Sentenced In Manhattan Federal Court To Five Years In Prison For Participating In Massive Tax Fraud Scheme That Concealed Over $50 Million In Income From The IRS And For Witness Tampering
Preet Bharara, the United States Attorney for the Southern District of New York, announced that ADEM ARICI was sentenced today in Manhattan federal court by Chief United States District Judge Loretta A. Preska to five years in prison for his role in a long-running tax fraud conspiracy in which more than $50 million in gross receipts from six gourmet food markets in New York, New Jersey, and Connecticut was hidden from federal, state, and local tax authorities. ARICI was one of the leaders of the scheme and was one of the two of the nine defendants charged in the case with ownership interests in all six markets. ARICI pled guilty on June 4, 2013, before U.S. Magistrate Judge Paul E. Davison to one count of conspiracy to commit tax and fraud offenses, four counts of subscribing to false and fraudulent federal personal income tax returns, nine counts of aiding and assisting in the preparation of false and fraudulent federal corporate, partnership, and payroll tax returns, and one count of witness tampering in connection with a federal investigation of individuals engaging in prohibited transactions in which a Cuban national had an interest.
Manhattan U.S. Attorney Preet Bharara stated: “Those who cheat on their taxes impose an unfair burden on everyone else who dutifully pay their fair share. Adem Arici used the cover of his popular, gourmet markets to engage in tax and other fraud. Today, he learned the price he must pay for his crimes.”
According to the Indictment and statements made during court proceedings:
ARICI had an ownership interest and played an active management role in the following gourmet food markets (the “Markets”):
- Zeytuna, also known as Idaho Farmers Market, Inc., located at 59 Maiden Lane, New York, New York.
- 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 Oakland Fine Food, Inc., located at 350 Ramapo Valley Road, Oakland, New Jersey.
- 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.
The Markets’ customers typically 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 particular Market. The remaining cash was diverted from the books and records of the Markets. The owners of the Markets used this cash to pay business expenses, including cash payroll, as well as to line their own pockets. They paid numerous employees, including undocumented foreign citizens, in cash. The owners of the Markets failed to withhold and pay to the IRS the withheld payroll taxes, and caused the preparation and filing with the IRS of forms that falsely and fraudulently understated the true salaries paid to employees. In many cases, they failed to report the salaries of employees entirely.
The cash that was left over after paying business expenses was divided up among the owners of the Markets for their own personal uses. The owners of the Markets maintained a “second set of books” and other records that recorded the true income and expenses of the Markets and reflected the cash skimmed from each of the Markets. These books showed that the owners of the Markets failed to report in excess of $50 million in gross receipts during the years 2004 through 2009.
In addition to depriving federal, state, and local governments of approximately $5 million in corporate, payroll, and sales taxes, ARICI himself avoided paying over $1 million in personal income taxes.
With respect to the witness tampering count, on or about November 18, 2011, ARICI counseled an individual with whom he had traveled to Cuba unlawfully to falsely tell law enforcement agents with the Department of Homeland Security, among other things, that the individual did not travel to Cuba, did not know ARICI, and had not met with ARICI in Cuba.
In addition to the prison term imposed on ARICI, 51, of Easton, Connecticut, Chief Judge Preska ordered ARICI to forfeit $7 million and to serve three years of supervised release.
On September 12, 2013, co-defendant Jody Vitale was sentenced to time served followed by two years of supervised release, and ordered to forfeit $354,166. On October10, 2013, Josefina Caraballo was sentenced to one year of probation, and ordered to forfeit $41,331. Defendants Omer Ipek and Atilla Yayla are fugitives. All other defendants are awaiting sentencing.
Mr. Bharara praised the outstanding efforts of the Internal Revenue Service, Criminal Investigation, and the U.S. Immigration and Customs Enforcement’s Homeland Security Investigations.
The case is being handled by the Office’s White Plains Division. Assistant U.S. Attorneys Lee Renzin and Perry A. Carbone are in charge of the prosecution.
The charges contained in the Indictment against the fugitive defendants remain pending and are merely accusations. Those defendants are presumed innocent unless and until proven guilty.