Accountant, IRS agent take stand in tax evasion trial

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Testimony in the tax evasion trial of three members of the Zourdos family 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 an IRS agent about the exact nature of the daily sales calendar books that were maintained at each of the stores. Gilroy testified on Thursday that he did not know the calendar books existed. He said the one time some of them were in his possession, he didn’t crack them open, in part because he trusted the Zourdos family.

The IRS agent — Susan Johnson — testified on Thursday that Gilroy’s office gave her the books as part of an audit she conducted on the Dippin Donuts store on Black River Boulevard in 2016. Johnson said she understood some of the numbers in the book, but not all of the numbers. Who informed her about some of the numbers? Johnson told the jury she does not remember, but noted that Gilroy was the only person she spoke to about the audit of Dippin Donuts.

The defense for the Zourdos family is arguing in federal court this week that Gilroy knew more about those calendar books than he told the jury and his possible negligence is why they are now on trial on accusations of tax evasion.

John, Helen and Dimitrios Zourdos, all of Rome, are accused of funneling roughly $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 the daily cash sales and depositing it directly into their personal bank accounts, then never telling their accountants about the deposits, leading to faulty tax returns.

They are all charged with one count of conspiring to defraud the United States, seven counts of tax evasion and seven counts of aiding and assisting in the filing of false corporate income tax returns, according to the U.S. Department of Justice, Tax Division. They each face at least three to five years in federal prison if convicted on the charges.

The prosecution is expected to finish their case either late in the day on Friday or on Monday. The jury could begin deliberations early next week.

The 2016 audit

IRS revenue agent Susan Johnson testified on Thursday that she conducted an audit on the Black River Boulevard Dippin Donuts in 2016, as instructed by her superiors the IRS. She explained to the jury that each of the three Dippin Donuts 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 shop on Black River Boulevard.

Johnson testified that she never spoke with anyone from the Zourdos family, that their accountant — Gilroy — was granted the power to cooperate on the business’ behalf. Johnson said Gilroy and his office turned over all tax preparation information and financial
statements, and that “there was no reason” to look into the personal bank accounts of the Zourdos family.

The one thing she wanted that she did not get were the cash register tapes, Johnson said. She was told the family did not keep the tapes, so she asked for any other records of daily sales. This led to Gilroy turning over the daily sales calendar books for 2014 and 2015, provided to him by the Zourdos family.

Gilroy testified on Thursday that he was not worried about the audit because he was confident 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 getting paid cash under the table for benefits.

“She said that was the only cash payment that was going out,” Gilroy told the jury.

Gilroy testified that, instead of cash register tapes, the Zourdos family told him “they did have some books that were daily books that they kept by the register that they could provide to me.”

Gilroy told the jury that he never looked into the calendar books before handing them over to Johnson.

“I didn’t think I needed to,” Gilroy testified. “There was a trust between us that they were going to match the bank deposits.”

Gilroy did point out that he may have confused the calendar books for separate sales tax notebooks that the Zourdos family used to give him to compute sales tax.

Calendar books

As testified to by multiple witnesses in the trial so far, the daily sales calendar books were maintained by John, Helen and Dimitrios Zourdos at each of the three stores. On the left side of each page were the total front counter and drive through sales for each day. In the middle of each page was the daily cash deposit amount into the corporate bank account. On the right side of each page was the daily credit card deposit amount into the corporate bank account, according to testimony.

Multiple witnesses have pointed out this week that the sum of the sales numbers did not match the sum of the deposits. This difference in cash is what the government has accused the Zourdos family of depositing in their personal bank accounts.

Susan Johnson testified that she looked through the calendar books and matched the daily cash deposits to the corporate bank accounts, along with the credit card deposits. She told the jury that she believed the daily cash deposit amount was the total in cash sales for that day.

Johnson said she did not know what the numbers on the left side of the page meant — the total front counter and drive through sales.

“I cannot recall specifically, but I remember thinking they were register readings,” Johnson testified.

She said she could see that the sum of the sales did not match the sum of the deposits, but, “I believed that to be a sales tax discrepancy.”

When asked by the defense attorney how she knew that the number in the middle of the page was the daily cash deposit, Johnson said she could not remember. She admitted on the stand that she only person she spoke to about the books was Gilroy, but “I can’t recall the conversation”.

Johnson testified that because the daily cash deposit number matched the corporate 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 had she known that the numbers on the left side of the page were the total sales numbers, and that they did not match the total deposit numbers, it would have greatly “expanded the audit” and likely would have discovered the family deposits into their personal bank accounts.

Other testimony

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

When preparing the corporate and personal tax returns each year, Gilroy told the jury that he did not always ask the Zourdos family if they had given him all of the documentation he needed.

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

Gilroy said he once spoke to John Zourdos about his business and said,” All sales should be deposited in the corporate bank account.” Gilroy added, “It if went in a different bank account, it would still be Dippin Donuts income and would belong in this tax return.”

Had he known the Zourdos family was depositing cash from sales into their personal bank accounts, Gilroy said, “I probably would have resigned from doing any work for them.”

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

Two more former Dippin Donuts employees also testified on Thursday about getting paid cash for any overtime hours worked. Like all former and current Dippin employees who have testified this week, both Tyler Falcone and Kaleena Kelly have been granted immunity by the court from being prosecuted for not declaring these cash payments on their tax returns.

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

Falcone said she also asked Helen about tips that were pooled between employees.

“I was told that I did not have to claim tips when I started working there,” Falcone said, noting that she earned roughly $100 in tips per week.

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

“Because it was saving us on paying taxes on that money,” Kelly explained what she was told. “And that we would be making out better than time and a half.”

Kelly and several employees have 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 payroll check. Kelly said the Zourdos family stopped paying the cash once they were under investigation for tax evasion.

Kelly noted that she could not recall “100%” if Helen was the one who told her about the cash and saving on taxes, though “Helen was always the person I spoke to.”

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