Crime & Safety

Second Nifty Fifty's Co-Owner Sentenced in Tax Evasion Scheme

Three others who pleaded guilty to charges in the case will be sentenced this week.

A co-owner of a 50s-style diner–which had a Bensalem location until recently–has been sentenced to three years in prison for his alleged involvement in a $15 million tax evasion conspiracy.

Leo McGlynn 53, of Swarthmore, a co-owner of the Nifty Fifty's restaurant chain, was sentenced Tuesday for his role in a scheme that cheated the Internal Revenue Service by failing to properly account for more than $15 million in gross receipts. 

McGlynn pleaded guilty in May of 2012 to conspiracy, tax evasion, bank fraud, and aggravated structuring of financial transactions. McGlynn, along with co-defendants Robert Mattei, Brian Welsh, Joseph Donnelly, and Elena Ruiz, all of whom also pleaded guilty, constructed a long-running scheme to avoid paying millions of dollars in personal and employment taxes related to their restaurant chain, the U.S. Department of Justice for the Eastern District of Pennsylvania alleged. 

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The owners not only evaded paying taxes they owed, they filed income tax returns claiming they were due refunds based on the erroneous reporting of their incomes, authorities said. 

The restaurant owners evaded paying taxes since the restaurant was established in 1986 by, among other things, paying employees a portion of their wages with unreported cash in order to evade payroll taxes; paying suppliers with unreported cash; and having false tax returns prepared that under-reported income and falsely inflated expenses and deductions, according to authorities. 

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Between the years 2006 and 2010, the defendants did not properly account for $15.6 million in gross receipts, thereby evading $2.2 million in federal employment and personal taxes, authorities said. In the conspiracy, Mattei, McGlynn, Donnelly, and Welsh committed bank fraud by submitting to the bank bogus income tax returns to secure several business loans, authorities alleged.

In addition, McGlynn and Donnelly structured more than $200,000 of cash deposits into a bank account belonging to McGlynn in a manner designed to evade the bank’s legal reporting obligation, so he could pursue the purchase of a home at the New Jersey shore, authorities allege. 

The Bensalem location, which was destroyed by fire in Julyhit the real estate market in September with a $2 million asking price.  

In addition to the prison term, U.S. District Court Judge Mary McLaughlin ordered restitution, joint and several, in the amount of taxes, penalties, and interest the restaurant owners and their business owe for the years 2006 through 2009. She also ordered McGlynn to pay forfeiture in the amount of $205,300. 

To date, the IRS has received $4,336,871 in tax payments and the full amount of the forfeiture obligation. Mattei was sentenced Monday to 15 months in prison plus 12 months of home confinement. Donnelly will be sentenced on Wednesday and Ruiz and Welsh will be sentenced on Thursday. 

This case was investigated by the Internal Revenue Service Criminal Investigations and the FBI. It is being prosecuted by Assistant United States Attorneys Paul G. Shapiro and Nancy E. Potts. 


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