Accountant to blame, defense says, in trial

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The blame for the Zourdos family’s federal tax evasion charges can be laid squarely at the feet of their longtime accountant, who had access to all of the family’s financial records, but did a “terrible job” in filing the proper tax returns.

This is according to the defense attorney for John and Helen Zourdos, of Rome, who gave his opening statement Monday afternoon at the start of the family’s federal court trial regarding their business, Dippin Donuts. The attorney said John and Helen were living the “American Dream” of owning a very successful small business and the money they are accused of hiding from the government was legal “compensation” for their work.

Meanwhile, the defense attorney for their son, Dimitrios Zourdos, said all of the money his client received as “gifts” from parents to son and was therefore not taxable.

The trial for all three families members started with jury selection Monday morning at the federal courthouse in Utica, presided over by U.S. District Court Judge David N. Hurd. A jury of nine men and three women was seated shortly after noon. The trial is expected to last into next week.

John, 68, Helen, 64, and Dimitrios Zourdos, 37, 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 are accused of embezzling roughly $1 million in cash sales from Dippin Donuts between 2013 and 2017.

They each face at least three to five years in federal prison if convicted on the charges.

The first witness in the trial was Thomas Bolus, a custodian of records for the federal IRS. Bolus took the stand Monday afternoon and began to lead the jury through summaries of the Zourdos family’s tax returns between 2011 and 2016. Bolus’ testimony was scheduled to continue Tuesday morning.

Prior to the first witness, both the prosecution and both defense attorneys gave opening statements to the jury.

Prosecutors: ‘Fraud and greed’

Assistant U.S. Attorney Michael F. Perry accused the Zourdos family of hiding hundreds of thousands of dollars in cash sales at Dippin Donuts from the IRS by both “paying themselves in cash” and by paying some employees “under the table.”

“This case is about fraud and greed,” Perry told the jury.

“There is a steady flow of cash into their personal bank accounts.”

Perry said the Zourdos family kept daily calendar books for all three of their Dippin Donuts shops — two in Rome and one in New Hartford. He said the books tallied the cash and credit card income at all three stores, and noted how much was then deposited in the business bank accounts. Perry said the amount of cash deposited into the business did not match the amount earned each day.

“The case is not about the intricacies of the tax code; it’s about income,” Perry said.

“How much money did the defendants make and how much money did they tell the government they made?”

Perry explained that the Zourdos family used Vincent Gilroy, a certified public accountant, to file both their business and their personal tax returns. Perry said the Zourdos family only ever gave Gilroy the bookkeeping materials for the business bank accounts, never the calendar books or information on their personal bank accounts where the “diverted” cash was going.

“John and Helen told him (Gilroy) that all the money that came into Dippin Donuts went into the business bank accounts,” Perry told the jury.

In his opening statement, Perry said the Zourdos family used the “diverted” income to live a “luxurious lifestyle,” including paying $21,000 in cash for a Porsche, $18,000 in cash for a custom-ordered Rolex watch and $30,000 in cash for “mint condition” restoration of one of Dimitrios’ classic cars. Perry said the family also took annual vacations to Greece, John’s home country.

When federal investigations executed a search warrant on John and Helen’s home, Perry said they found $299,000 in cash stashed at the residence.

Defense: Accountant ‘dropped the ball’

Defense attorney David Garvin represents John and Helen Zourdos and he told the jury in his opening statement that “John had no tax background and no person to educate him with regards to income taxes.”

Garvin explained to the jury how John Zourdos moved to the U.S. when he was roughly 16-years-old to work at his uncle’s McDonalds restaurant. Garvin told the jury how John met his wife and they had two children, and then they opened their first Dippin Donuts on Erie Boulevard West in Rome in 2001. The second and third stores, on Black River Boulevard and in New Hartford, were opened in 2005, he said.

“This is the American Dream,” Garvin told the jury. The Zourdos family “put all their energy into this new company” and “earned every penny,” Garvin stated.

“The defendants will not run from the facts, they will not hide from the financial documents,” Garvin said. “They acted in good faith.”

Garvin instead blamed the family’s accountant, Gilroy, for failing to do his job and understand the full extent of the company and the family’s income. Garvin said Gilroy — “for whatever reason” — failed to file the necessary paperwork that would differentiate Dippin Donuts as an “S Corp” as opposed to a “C Corp” — in IRS lingo.

An “S Corp” is not taxed, and instead all of the revenue is reported as personal income by the owners, Garvin explained to the jury. He said that because Gilroy did not elect that option for Dippin Donuts, the company remained a “C Corp,” which he said is taxed twice — the company revenue is taxed and then the owner’s personal income from the company is taxed.

Because of this, Garvin said that John Zourdos was instructed early on in his career to not store money in the company.

“They would be subjected to needless double taxation,” Garvin told the jury. So John would “periodically” take out cash and put it in his personal bank account as “compensation”, leaving just enough in the company coffers to keep the stores running.

“They made absolutely no effort to hide it,” Garvin told the jury. The cash was deposited in their personal bank accounts, he explained, and the calendar books and other financial records were stored in the Dippin Donuts shops. Garvin said that Gilroy’s assistant, Heather O’Rourke, had full access to these records when she visited the shops to do accounting work for the company.

The Zourdos family “became accustomed to rely” on Gilroy and O’Rourke “without question,” Garvin stated.

He told the jury that Gilroy became “too busy” after taking on 750 tax returns a year, and that O’Rourke was likely the one who actually filed the Zourdos family’s tax returns. Garvin said Gilroy changed his story to investigators four times regarding what he knew about the calendar books.

“Gilroy completely dropped the ball in this case and deflected responsibility onto Mr. and Mrs. Zourdos,” Garvin told the jury.

As for the $299,000 in cash found at the Zourdos family home, Garvin said it was John’s “rainy day fund” after he lost faith in banks during the recession in 2018. He explained that money had accumulated over the course of nine years.

Meanwhile, defense attorney Gabriel Nugent gave a brief opening statement for his client, Dimitrios Zourdos, claiming that evidence against Dimitrios was “vanishingly small.”

Nugent said Dimitrios “was a loyal son and a hard worker” who “did his level best” at the family business, while having nothing to do with any family financial decisions. He said Dimitrios had never met Gilroy or O’Rourke, and simply “did what his family did” in sending taxes to Gilroy.

All of the extra cash that the government is accusing Dimitrios of stealing was “gifts from a parent that were not taxable at all,” Nugent explained. He told the jury that Dimitrios’ sister, who did not go into the family business and is not charged, received similar “gifts” from John and Helen.

“Their parents loved them and gave them gifts,” Nugent told the jury. “It’s really that simple.”

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