Croton Market Owners Charged with $56M Tax Fraud

The owners of the Zeytinia Gourmet supermarket in Croton-on-Hudson and five other similar markets face up to 27 years in prison for allegedly conspiring to hide more than $56 million in gross receipts from federal and state tax authorities.

In a 34-page indictment unsealed on July 20 in White Plains federal court, U.S. Attorney Preet Bharara and Internal Revenue Service Criminal Investigation (IRS-CI) Acting Special Agent Toni Weirauch brought charges against the following individuals:

Adem Arici, 50, of Easton, Conn.;

his brother, Cevdet Arici, 44, of Buchanan;

Omer Ipek, 50, of Tallahassee, Fla.;

Erdal Kilic, 36, of Jersey City, N.J.;

Armagan Tanir, 42, of Little Falls, N.J.;

Atilla Yayla, 37, of Atlantic City, N.J.;

Jody Vitale, 54, place of residence unknown;

Andrew Poma, 32, of Irvington;

and Josefina Caraballo, 49, of Kearny, N.J.

Authorities said all of the defendants have or had ownership interests in one or more of six fine food supermarkets in New York, New Jersey, and Connecticut.

In addition to the conspiracy charge, all nine defendants are also charged with one count of endeavoring to obstruct and impede the due administration of the internal revenue laws. In addition, Adem and Cevdet Arici, Ipek, Kilic, Tanir, Poma, and Caraballo are charged with multiple counts of subscribing to false and fraudulent federal personal income tax returns; and Adem and Cevdet Arici, Ipek, Kilic, Tanir, Vitale, and Poma are charged with multiple counts of aiding and assisting in the preparation of false and fraudulent federal corporate, partnership, and payroll tax returns.

“As alleged, the scheme in which Adem Arici and his codefendants engaged was a flagrant violation of multiple federal tax laws that cheated the IRS out of millions of dollars in tax revenues,” said Bharara. “They used their businesses as vehicles through which they could perpetrate their alleged crimes and will now be forced to answer for their conduct.”

“IRS-CI seeks to foster the confidence of the public in the nation’s tax system by working to ensure that everyone pays their fair share,”  added Weirauch. “We are committed to uncovering and investigating all kinds of tax evasion schemes -however simple or however complex – and working with the Department of Justice to see that the perpetrators of these schemes are vigorously prosecuted.”

According to the indictment, Adem and Cevdet Arici, Ipek, Kilic, Tanir, Yayla, Vitale, Poma, and Caraballo each had an ownership interest and active involvement in one or more of the six “fine food supermarkets” identified in the charges. The indictment includes the following allegations in relation to their alleged ownership stakes:

Adem Arici and Ipek owned a 50 percent or more interest in each of the markets. The markets’ customers paid for their purchases with either cash or credit cards. Credit card payments, and on occasion a small portion of the cash receipts, were deposited into bank accounts maintained by each of the supermarkets. The remaining cash was diverted from the books and records of the markets and used to pay certain cash business expenses, including the markets’ payrolls. The remaining cash was divided up among the market owners for their own personal use.

The market owners concealed their cash-skimming scheme from federal and state tax authorities by: filing false federal and state corporate and partnership tax returns that understated the gross receipts of the markets; filing false state sales tax returns that understated the sales of the markets; filing false federal and state personal income tax returns that failed to report as income the cash skimmed from the markets by the market owners; and maintaining a second set of books and other records documenting that the owners skimmed cash from each of the market locations for their own personal use.

The second set of books used to record the true income and expenses of the markets reflect that the markets failed to report in excess of $56 million in gross receipts during the years 2004 through 2009.

The markets paid their management and staff through accounts maintained in the name of each particular market. The market owners were obligated to: withhold and pay over certain payroll taxes to the IRS; file IRS Forms 941, which are quarterly payroll tax forms that report to the IRS the income paid to employees and the taxes withheld; and file annual IRS Forms W-2 with the IRS and send a copy to each employee, reflecting the taxes withheld and salary paid during the tax year. Instead, they paid numerous employees, including undocumented foreign citizens, in cash. Moreover, the market owners failed to withhold and pay the withheld payroll taxes to the IRS, and caused the preparation and filing of forms that falsely and fraudulently understated the true salaries paid to employees and in many cases failed to report the salaries of employees entirely, as was documented in the second set of books.

To conceal their ownership of the markets’ assets, the market owners transferred assets into the names of straw owners (people who own property legally or have the legal appearance of owning something, but do so on behalf of another, sometimes for a fee, and typically solely to hide the identity of the effective owner).

Additionally, on three occasions in late 2009, several of the market owners met with two IRS undercover agents posing as prospective buyers of several of the markets. During the first meeting, Kilic and Adem Arici told them that the market owners skim a substantial amount of cash, underreport income received from the markets, and pay employees off the books. At the second meeting, Adem Arici, Tanir, Kilic and Yayla told the agents that the market owners also skim a substantial portion of the receipts and file false tax returns, and Cevdet Arici told them, during the third meeting, that the market owners skim a substantial portion of the receipts and divide the cash amongst themselves.

The indictment also contains charges from an underlying Indictment against Adem Arici and his attorney, Marc E. Verzani, 46, of Scarsdale, alleging that they conspired to violate, and violated, the Cuba trade embargo; that Verzani and Adem Arici engaged in witness tampering in connection with the investigation; and that Verzani obstructed justice.

Cevdet Arici and Jody Vitale were arraigned last week before U.S. Magistrate Judge Lisa Margaret Smith in White Plains federal court and were remanded pending satisfaction of bail conditions, a $250,000 personal recognizance bond secured by $100,000 and two responsible co-signers for Arici and a $200,000 personal recognizance bond secured by two responsible co-signers for Vitale. The case has been assigned to U.S. District Judge Cathy Seibel, who set a hearing for Thursday, Aug. 16 at 11 a.m.

Adem Arici and Ipek each face a maximum sentence of 27 years in prison, Caraballo faces a maximum sentence of 20 years in prison. Kilic, Tanir, Poma, and Cevdet Arici each face a maximum sentence of nine years in prison. Yayla faces a maximum sentence of eight years in prison, and Vitale faces a maximum sentence of six years in prison.

In addition to IRS-CI, the U.S. Immigration and Customs Enforcement’s Homeland Security Investigations and the U.S. Department of Justice’s Tax Division provided significant assistance in the investigation.

The U.S. Attorneys Office’s White Plains Division is handling this case. Assistant U.S. Attorneys Perry A. Carbone and Lee Renzin are in charge of the prosecution.