Two brothers who formerly co-owned a longtime Paterson Italian restaurant admitted Wednesday to dodging more than $240,000 in taxes by hiding income from their cash-only eatery.
Elio Federico, 71, of Totowa, and Ralph Federico, 68, of Saddle Brook, pleaded guilty in Newark federal court to one count each of tax evasion for the three year scheme.
Though officials did not publicly name the restaurant, the brothers have been widely reported as the proprietors of E&V Ristorante on Chamberlain Avenue, which opened in 1967.
“The brothers operated the restaurant on a cash-only basis, paid a substantial portion of the employee payroll in cash, and paid virtually all of their suppliers in cash,” a statement from the U.S. Attorney’s Office said.
The men admitted they hid a portion of their income from the IRS by taking what is known as a “cash skim” from gross receipts at the business that were not reported as income, purposely withholding invoices from their accountant which showed the real cost of goods and income, and reprogramming the cash register to not log a gross receipt balance for more than a few days.
The tax scam lasted between 2011 and 2014, leaving the government out $241,219 in taxes.
Both men face a possible maximum five year prison term and $250,000 fine when they are sentenced Sept. 4, according to officials.
Zagat called the family-run E&V Ristorante one of the top 100 Italian restaurants in 2008. The brothers learned to cook from their mother and came to the area from Italy.
“I’m going to see if someone else can run it; I gotta retire,” Ralph Federico said in a 2016 interview.
It was not immediately clear who is currently running the establishment, which advertises that it accepts credit cards.
“I have no idea what you’re talking about,” said a woman who answered the phone at the business Wednesday.