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Adel Kellel, 63, of New Hyde Park, “cooked his books to conceal income” from state and federal authorities that was generated by Raffles Bistro in the Lexington Hotel in East Midtown, Acting Southern District of New York U.S. Attorney Audrey Strauss said following his sentencing in downtown Manhattan.
He used the diverted money to buy vehicles from Mercedes, Porsche and Maserati, to patronize luxury retailers such as Hugo Boss and Saks Fifth Avenue, to travel domestically and internationally, as well as for condo fees, rent on a high-end Manhattan apartment and college tuition payments for his children, Strauss said.
Kellel had been president and owner of K&H Restaurant Inc. (K&H), which operated the coffee shop and full-service restaurant at the corner of Lexington Avenue and 48th Street, federal authorities said.
Kellel filed false personal returns and corporate returns for K&H and evaded his taxes by diverting and failing to report substantial gross receipts to the IRS from 2012 through 2015, the government said.
For example, federal authorities said, Kellel diverted over 150 hotel checks totaling over $2.1 million – about 43% of the hotel payments that K&H received by check.
He “hid the gross receipts from his accountants and the IRS by depositing the checks into more than a dozen undisclosed bank accounts,” Strauss said.
These included personal accounts that Kellel held either individually or jointly with his wife, as well as accounts held in the name of K&H, “some of which were opened solely to have an additional place to deposit diverted checks,” she said.
Kellel also diverted substantial cash income received from Raffles’ customers, a portion of which he deposited into personal bank accounts or spent directly on personal expenses -- again, without disclosing to his accountants or paying taxes -- federal authorities said.
Kellel pleaded guilty earlier this year to one count of tax evasion relating to the 2011 to 2015 tax years.
He’ll have to spend just about all of his 24-month sentence because there’s no parole in the federal prison system. That will be followed by three years of supervised release.
A federal judge also ordered Kellel to pay restitution of $613,478 to the IRS and $157,717 to the state of New York.
“All taxpayers have an obligation to honestly report their income and pay their share of taxes,” said Principal Deputy Assistant Attorney General Richard E. Zuckerman of the Justice Department’s Tax Division. “For those who attempt to avoid these obligations and cheat the IRS, as this sentence shows, there are serious consequences.”
Zuckerman and Strauss praised the work of IRS Criminal Investigations in obtaining the charges, plea and sentence, secured by Trial Attorney Jorge Almonte of the Tax Division and Assistant U.S. Attorney Olga I. Zverovich.
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