Judge: Tax Evasion Means Prison Time

U.S. District Judge Stefan Underhill decided Tuesday to send a well-known deli owner to prison in order to ​“send a message” — that tax evasion is a serious crime with serious consequences.

Underhill sentenced Raymond George, owner of Ray and Mike’s Deli and Dairy in Hamden, to nine months behind bars, a $5,000 fine, and a year of supervised release for trying to keep over $200,000 in taxes from the government. Underhill handed down the sentence at a hearing in U.S. District Court in Bridgeport on Tuesday. George pleaded guilty in May.

George pleaded to be spared jail time. As a cluster of George’s family, friends, and employees looked on, Underhill weighed the testaments of character and fears for employees submitted by the defense against the prosecution’s stance that consequences deter further crimes.Though the defense did not get its request for no jail time, nine months is less than the government’s guideline sentence of 12 – 15 months for a tax crime of this magnitude.

“I don’t know why you did this. I’ll be frank, I don’t have a clue why somebody with as much as you” wouldn’t pay taxes, Underhill told George before announcing his sentence.

“It doesn’t matter so much why you did it. It matters that you did it, and we have to send a message to folks.”

George, 53, has operated Ray and Mike’s on Whitney Avenue since 1997. In 2012, he underreported his income to the federal government by about $365,000, and in 2013 by about $273,000. He deposited checks from the business accounts into his personal investment account and failed to report it as income. He also used cash from sales to refill the ATM in the store rather than depositing it into the business account, allowing him to not report it as income.

Employees Are ​“Family”

George’s Attorney, Lisa Perkins. made her case for home or community confinement instead of incarceration by defending George’s excellent character and the hardship George’s absence might impose on his employees.

“The employees he employs he treats as family,” Perkins said. She asked Underhill to consider the impact that George’s incarceration would have on ​“innocent third parties.”

Ray and Mike’s currently employs 14 people. The defense, and the 24 letters it submitted to attest to George’s character, stated that he goes out of his way to help the people whowork for him. According to some employees, he is flexible with schedules, works extra hours so that they can work less, and has picked up their kids from camp when they needed it. One letter, from Hamden Deputy Chief of Police William Onofrio, described George as ​“a person of good moral character and an upstanding Hamden citizen.” Another called Ray and Mike’s ​“a cornerstone within our community,” adding that George’s absence would have a negative impact on that community.

Only one of the people who submitted letters spoke at the sentencing, though others showed up to watch. Haley Wright, who said she has worked for George for 19 years, told Underhill that ​“if anyone deserves a second chance, it’s Ray.” In her letter, Wright said that George ​“does whatever he can to help” her as she raises a son alone, often driving her son to camp before he comes to work.

If George were imprisoned, argued Perkins, employees like Wright would take a hit. No one else, she wrote in a sentencing memo, could run the business in his stead because no one knows it the way he does.

Federal prosecutor Michael McGarry countered that George’s incarceration does not have to result in the closure of Ray and Mike’s. George could hire a manager to run the business in his absence, McGarry said. He cited another case, United States v. Barbera, against a doctor. In that case, the court ruled that ​“Barbera’s medical expertise is not irreplaceable.” If a doctor’s expertise can be replaced, McGarry argued, then so can a deli owner’s.

Underhill acknowledged that George appears to be admired and hardworking. However, he said, ​“it does not follow that [he is] so essential to the business that it’s going to collapse.”

McGarry also highlighted the fact that George’s was not a crime of necessity. With just a glance at the documents, he said, ​“one might think that’s how he makes ends meet.” But a closer look at the finances, he said, shows that ​“this is not a crime driven of need.”

George, said McGarry, is a millionaire running a successful business, ​“yet he still decided to take money, put it in an ATM, not report it,“ committing a crime that exhibited ​“an extra layer of cleverness.”

Perkins did not deny that George is a wealthy man. She said he became so ​“by working incredibly hard — 70, 80 hour weeks … It wasn’t by filing false returns for 2012 and 2013 that he came into that wealth.”

She added that this was an isolated incident, and that ​“before this time and after he remains a law-abiding citizen.”

A Deterrent For Others

George has now paid almost $480,000 in back taxes, interest, and penalties to the IRS. That, said Perkins, is more than twice the amount he owed in taxes to begin with, and is the full restitution for the crime (aside from a small amount of interest).

George’s having paid for the costs of the crime should not affect his sentence, argued McGarry. If someone came before the court who did not pay those back taxes and penalties because he couldn’t afford them, he said, should that person be given a harsher sentence than George? Then the law would be treating the wealthy more favorably.

The relative length of the sentence in cases of tax evasion, he argued, is important in deterring those considering similar crimes.

“Nobody commits a tax crime in anger on a Saturday night,” McGarry said. White collar criminals act in a calculated manner with knowledge of the consequences. Giving George a sentence of incarceration, he said, will show a generation of Quinnipiac University students, business owners, and community members ​“that if you don’t pay your taxes, there’s going to be a consequence.”

As Underhill began his remarks, he turned to George and addressed him directly.

“I think this is an incredibly serious offense,” he said. ​“You’ve effectively stolen money from the American people. … Somehow when it’s a tax offense, people think it’s not as serious. I think it’s more serious.”

He agreed with McGarry that in cases of tax evasion, prison sentences discourage potential future criminals.

As for the amount of time behind bars, he said, the government’s guidelines, which he had the authority to ignore in this case, were not helpful. The guidelines would have had George in prison for 12 – 15 months; Underhill opted for a below-guideline sentence with the nine months.

George must voluntarily surrender to prison at 2 p.m. on March 17, 2020. Underhill gave him the six months before his prison term so that he can figure out what to do with his business while he’s in prison.

Perkins asked Underhill to recommend that George serve his term at Otisville Federal Correctional Institution in Otisville, N.Y., where former Donald Trump attorney Michael Cohen is serving a sentence. (Click here for a series of Independent articles about life in Otisville by a New Haven defendant.)

As Perkins and George left the courthouse, they joined the circle of friends and relatives standing next to one of the building’s imposing cement columns. Perkins spoke for George.

“He understands that the judge was just doing his job,” she said. ​“He intends to explore his options… to try and keep Ray and Mike’s in the community.”