By Graham Brink -
The founder of the Hooters restaurant chain, Lynn "L.D." Stewart, failed to pay millions of dollars in federal income tax, according to authorities.
An indictment made public in the U.S. District Court in Tampa Friday accuses Stewart of two counts of tax evasion and two counts of filing a false tax return.
Stewart failed to pay $1.7-million in income taxes for 1997 and $2.3-million for 1998, the indictment states. He earned $12.1-million in taxable income in those two years, but he declared $910,044, according to court documents.
The maximum sentence on the tax evasion charges is five years in prison for each count and three years for filing a false tax return.
Stewart's lawyer, Anthony LaSpada, said Friday that Stewart will fight the charges "all the way to the end."
LaSpada said Stewart simply followed the advice of an accountant who set up a web of offshore trust accounts that concealed his income from the Internal Revenue Service. Stewart was told the system was legitimate and has since hired new financial advisers, LaSpada said.
"Mr. Stewart relied on the advice of his certified public accountant," LaSpada said. "We will be able to show that."
Stewart's case is part of a nationwide crackdown on abusive and fraudulent offshore trusts, a push that began in the late 1990s. Those trusts, and related offshore financial maneuvers, account for one of the largest losses of tax revenue each year, experts say.
It's not illegal for Americans to move money into offshore accounts, but anyone who opens one must report it to the IRS. And investment income earned from the assets in the trust -- stocks, bonds, real estate, etc. -- must be reported because it is taxable.
Shifting untaxed income into a tax haven without declaring it to the IRS is tax evasion.
The St. Petersburg Times first reported Stewart's troubles in February. At the time, Safety Harbor business owner William Tiner had just been convicted of using fraudulent trusts to evade about $900,000 in taxes.
Tiner said he was looking to set up his retirement from his company, WLT Software of Florida. A friend introduced him to Michael Maricle, a certified public accountant in Clearwater who pitched a trust system run by Aegis, a Chicago company.
Tiner bought into the system in 1996, using domestic and charitable trusts to shield his assets from the IRS. In 1998, Tiner bought Aegis' foreign trust system, which helped him set up bank accounts in Antigua in the names of new foreign companies to further conceal his income, according to court documents. He used a credit card to access his money.
The government claimed Tiner moved income from his software company into several trusts, which then reported the money as "management fees" instead of income.
After working out a plea deal, Maricle testified against Tiner. During his testimony, Maricle detailed how another client of his, L.D. Stewart, used the same tax system. Maricle's written plea agreement said he prepared numerous tax returns for Stewart in "order to accomplish the unlawful tax consequences of the scheme."
Tiner was sentenced in May to five years in prison. Maricle received 30 months, though his sentence could be shortened because of his continued cooperation with prosecutors. And in a related case, Pinellas County investment adviser Howard Lee McCauley agreed to plead guilty to one count of tax evasion this month.
Stewart and five other men opened the first Hooters in Clearwater in 1983. The chain boasts about 356 restaurants in 12 countries and 44 states. Hooters of America is a private company and doesn't divulge earnings. In 2002, Nation's Restaurant News estimated Hooters had $560-million in food sales.
The founders sold franchise and licensing rights to Atlanta-based Hooters of America years ago but kept about 20 restaurants in Florida, Chicago and Manhattan.
In January, Stewart, the onetime majority owner of the chain, sued Hooters of America claiming the company breached a 1995 agreement to pay him a percentage of annual gross sales.
Source: St. Petersburg Times
