NYC Restaurateur Sentenced To Two Years In Prison For Tax Evasion Scheme

 

 Audrey Strauss, the Acting United States Attorney for the Southern District of New York, announced today that ADEL KELLEL, owner of Raffles Bistro, formerly a restaurant located in New York City, was sentenced in Manhattan federal court to two years in prison for perpetrating a tax evasion scheme.  KELLEL previously pled guilty before U.S. Magistrate Judge Gabriel W. Gorenstein to one count of tax evasion for the calendar years 2011 through 2015.  U.S. District Judge Paul G. Gardephe, who accepted KELLEL’s guilty plea, imposed today’s sentence.

Acting U.S. Attorney Audrey Strauss said:  “Adel Kellel cooked his books to conceal income from the IRS and his own accountants.  He spent the ill-gotten gains on personal luxuries like a Mercedes, a Porsche, and a Maserati.  Now he will spend two years in federal prison.”

According to the allegations contained in the Information to which KELLEL pled guilty, court filings, and statements made in public court proceedings:    

In 2011, KELLEL was the President and a 45 percent owner of K&H Restaurant, Inc. (“K&H”), which operated Raffles Bistro (“Raffles”), a restaurant then located in a hotel (the “Hotel”) in Manhattan.  From 2012 through 2015, KELLEL was the 100 percent owner of K&H.  The gross receipts of K&H consisted primarily of: (a) credit card payments by Raffles’ customers; (b) cash payments by Raffles’ customers; and (c) check payments by the Hotel for various services that Raffles provided to hotel guests and patrons, including room service, banquets, and catering.

KELLEL perpetrated a scheme to evade income taxes by diverting and failing to report to the Internal Revenue Service (“IRS”) a substantial portion of K&H’s gross receipts for the calendar years 2011 through 2015.  As part of his tax evasion scheme, KELLEL diverted over 150 Hotel checks, totaling over $2.1 million in gross receipts, which he hid from his accountants and the IRS.  KELLEL concealed these receipts – representing approximately 43 percent of this particular revenue stream for the restaurant – by depositing them into more than a dozen bank accounts that KELLEL did not disclose to his accountants.  KELLEL also diverted cash income received from Raffles’ customers, a portion of which he deposited into personal bank accounts or spent directly on personal expenses, without disclosing it to his accountants or paying taxes on it. 

KELLEL used the diverted income for various personal expenses, including overseas transfers; condominium fees; rent for a high-end Manhattan apartment; college tuition payments from his children; shopping at luxury retailers, such as Hugo Boss and Saks Fifth Avenue; payments for luxury cars manufactured by Mercedes, Porsche, and Maserati; and payments for domestic and international travel.

By fraudulently concealing from his accountants a substantial portion of K&H’s gross receipts, KELLEL caused K&H’s corporate income tax returns and KELLEL’s own individual income tax returns for the calendar years 2011 through 2015 to be materially false.  As a result of his conduct, KELLEL admitted to causing a combined tax loss of at least $771,195 to the IRS and the New York State Department of Taxation and Finance (“NYSDTF”).

In addition to the prison term, Judge Gardephe ordered KELLEL, 63, of New Hyde Park, New York, to pay restitution to the IRS in the amount of $613,478, and to pay restitution to NYSDTF in the amount of $157,717.  KELLEL was also ordered to serve three years of supervised release.

Ms. Strauss praised the outstanding work of the Internal Revenue Service, Criminal Investigation, in this case.  Ms. Strauss also thanked the U.S. Department of Justice’s Tax Division for its significant assistance in the investigation.