Three Dippin Donuts employees testify in day two of trial

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Three employees of Dippin Donuts took the stand on Tuesday to discuss that they were paid in cash for any overtime work and were never told they needed to claim any taxes on that money, according to testimony in the second day of the Zourdos family tax evasion trial.

One employee testified that she was trusted to fill out routine deposit slips for $400 and $500 to go directly into the personal bank accounts of Helen Zourdos and her children.

John Zourdos "asked if I'd be interested in taking on an additional role. And my answer was 'yes'," said former employee Kathryn Adams.

"The extra work I did in the office, it was not included in payroll."

John, Helen and their son, Dimitrios Zourdos, of Rome, are on trial this week in federal court, accused of embezzling roughly $1 million in cash sales from Dippin Donuts between 2013 and 2017 and never reporting that money to the IRS. 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.

Employee pay

Former Dippin employee Brittany Labuz and current Dippin employee Whitney Sykes both took the stand on Tuesday morning and told the jury how the basic Dippin operations ran. John Zourdos would frequent all three store locations throughout the day — two in Rome and one in New Hartford — assisting with direct sales and baking the donuts, while Helen worked more behind the scenes, usually handling scheduling. Dimitrios Zourdos was a manager at the Black River Boulevard location, the witnesses said.

The two employees testified that John Zourdos typically handled any financial work for Dippin, adding that Dimitrios would take over when John and Helen went on their annual vacation to Greece.

Both Labuz and Sykes testified that they were required to clock out of work once they hit 40 hours for the week, and those 40 hours would be paid through an official payroll company. They said they would receive paychecks on Friday. Both women told the jury that any overtime they worked would be paid in cash alongside their paychecks.

“My check would be 40 hours, and it would cut off at 40. And then I would get an envelope with cash in it — my overtime," Labuz testified. She noted that there was no difference in her work duties after 40 hours.

"I did the same job working over 40," she stated.

Sykes told the jury that she asked John Zourdos about the arrangement, and she got the impression that John felt "he was doing us a favor" by paying them in cash to avoid "taxes" on the money. Sykes clarified that John never said the word "favor" and he did emphasize that this would help them when it came to paying “taxes."

Both women told the jury that nobody told them they were being paid as independent contractors instead of employees after they clocked out 40 hours.

"I didn't know I had to report cash to the IRS," Labuz testified, noting that she was hired at Dippin Donuts in 2012 when she was 15-years-old. Sykes said she was hired in 2013 after graduating high school.

Deposit slips

Former employee Kathryn Adams testified that she worked at Dippin Donuts for nine years after originally being hired in 2005 at the age of 15. After graduating college in 2011, Adams told the jury that John Zourdos approached her with an offer to help him out in the business office.

Adams said she continued to work 40 hours a week behind a register at Dippin, then spent a couple of extra hours on the weekend working with John in the business office at the Erie Boulevard West location. She said she wrote business checks for vendors and wrote what she was told by John.

Adams told the jury that she was paid for these extra hours with a business check directly from the company, not through the usual payroll company that handled her paycheck. Adams said she kept track of her own overtime hours and "when I felt I reached a high enough amount" then she would tell John and he would cut her the check.

Adams said taxes were not taken out of the overtime checks and the money was not included on her W2 tax forms.

Adams testified that another one of her duties was to write cash deposit slips on a routine basis: $400 into the personal bank account of Helen Zourdos, and $500 in bank accounts for each of their children, Dimitrios and Rose. Adams said the numbers were "fixed" and "never changed." She said she did not write cash slips for business deposits.

Calendar books

Adams also testified about a series of daily calendar books that the Zourdos family maintained at each Dippin Donuts location. She said she was taught how to make some notations in the books.

According to Adams, the daily logs would keep track of total sales at the front counter and the drive through, along with the amount made via credit card that day and the amount of cash deposited into the business bank account.

By way of explanation, the prosecution handed Adams a calculator and asked her to add and subtract the sales and deposits for July 18, 2015. According to the numbers in the calendar book, the Erie Boulevard Dippin Donuts made $2,289 in drive through sales and $1,503 in counter sales on that day, Adams testified, and roughly $875.51 was from credit card sales. The notations in the book indicated that the Zourdos family deposited $1,087 in cash into their business account from that day, leaving $1,829.49 in cash unaccounted for.

According to Adams, $1,400 cash was deposited into the bank accounts of Helen, Dimitrios and Rose, deposit slips that she wrote herself. That still left $429.49 in cash unaccounted for, according to testimony.

And this was just one day out of years of calendar book notations, the prosecution noted to the jury.

Other witnesses on Tuesday included several special agents with the criminal investigation division of the federal IRS. Special Agent Julie Carruthers testified about executing a search warrant on the Erie Boulevard Dippin Donuts and seizing the calendar books. The prosecution also handed Carruthers the calculator and asked her to add and subtract the numbers from a different day in one of the books.

Special Agent Scott Ashlaw testified about executing a search warrant on the home of John and Helen Zourdos in Rome. Ashlaw told the jury that they found stacks of cash tucked away in various purses, wallets, drawers, hutches and cabinets in and around the Zourdos' master bedroom.

In total, Ashlaw testified that they seized $299,143 in U.S. currency, $7,340 in Euros and $35 in Canadian currency. Ashlaw told the jury that he had no way of knowing how long that money had been there or how long it had been accumulating.

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