Date: January 24, 2020
Jonathan D. Larsen, the Special Agent-in-Charge of the New York Field Office of the Internal Revenue Service, Criminal Investigation ("IRS-CI"), Geoffrey S. Berman, the United States Attorney for the Southern District of New York, Richard E. Zuckerman, and the Principal Deputy Assistant Attorney General for the Tax Division of the Department of Justice, announced that Adel Kellel, owner of Raffles Bistro, formerly a restaurant located in New York City, pled guilty today for his role in a tax evasion scheme. Kellel pled guilty before Chief Magistrate Judge Gabriel W. Gorenstein.
IRS-CI Chief Jonathan D. Larsen said: "When Mr. Kellel chose to hide millions of dollars from the IRS, he unfairly shifted the tax burden to honest American taxpayers. As we start the tax filing season, this is a stark reminder of the serious consequences of tax evasion, including potential imprisonment. IRS-CI will continue to be relentless in our mission to root out tax fraud."
U.S. Attorney Geoffrey S. Berman said: "As he admitted in court, restaurateur Adel Kellel cooked his books for years, skimming money from his restaurant and salting it away in personal accounts or using it for personal expenses. His scheme was a recipe for making millions in unreported income, but now he will have to pay for his gluttony."
Principal Deputy Assistant Attorney General Richard E. Zuckerman said: "The defendant funded his lavish lifestyle by failing to pay legally obligated taxes thus causing harm to all Americans. We remain committed to prosecuting tax criminals who refuse to pay their fair share."
According to the Information to which Kellel pled guilty and statements made in court:
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 concealed and did not 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 deposited substantial cash income received from Raffles' customers into personal bank accounts or spent it directly on personal expenses, without disclosing it to his accountants or paying taxes on it. Kellel also diverted over 150 hotel checks, totaling over $2 million in gross receipts, by depositing the checks into approximately a dozen bank accounts that Kellel did not disclose to his accountants.
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 the cash and a portion of the Hotel checks received by Raffles, 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 approximately $771,195 to the IRS and the New York State Department of Taxation and Finance ("NYSDTF").
Kellel of New Hyde Park, New York, pled guilty to one count of tax evasion and faces a maximum sentence of five years in prison. The maximum potential sentence in this case is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge. As part of his plea, Kellel agreed to pay at least $771,195 in restitution to the IRS and the NYSDTF. Kellel is scheduled to be sentenced by U.S. District Judge Paul G. Gardephe on April 23, 2020.
This case is being prosecuted by the Office's Complex Frauds and Cybercrime Unit. Assistant United States Attorney Olga I. Zverovich and Special Assistant U.S. Attorney Jorge Almonte of the Department of Justice's Tax Division are in charge of the prosecution.