AP NEWS
Related topics

Prominent Entrepreneur Pleads Guilty to Massive Tax Fraud

July 23, 1993

NEW HAVEN, Conn. (AP) _ A man whose grocery stores won him national recognition for gimmicks like mechanical singing cows and a petting zoo, pleaded guilty Thursday to skimming $17.1 million from sales.

Stewart J. Leonard Sr., two vice presidents and a former general manager at his sprawling Stew Leonard’s Dairy Store in Norwalk, admitted they conspired to defraud the government from 1981 to 1991 with help of a computer program that altered store records.

Through the scheme, Leonard was able to cheat the government out of $6.7 million in taxes, the government said.

Leonard’s abilities as a master promoter have earned him a mention in a dozen books, including Tom Peters’ ″A Passion for Excellence,″ and numerous marketing and management training videos. He was also the star of a Dale Carnegie ad campaign, and was honored by President Reagan.

His store was a 1991 finalist for the prestigious Malcolm Baldrige National Quality Award given by the U.S. Department of Commerce, but withdrew its name after the criminal investigation became public.

Federal investigators found the secret computer program, named ″Equity,″ in a hollowed-out copy of ″The Business Directory of New England 1982-83″ during a raid on executive vice president Frank Guthman’s office in August 1991. Nearly $500,000 was also found in a hidden safe at his residence.

″This was a crime of the 21st century. The fraud was committed with a computer, and the computer, in turn, convicted the criminals,″ said Michael Dreiblatt, chief of IRS criminal investigation for the Hartford district.

Leonard, 63; Frank H. Guthman, 52; vice president Stephen F. Guthman, 59, and former general manager Tiberio Belardinelli, 74, each pleaded guilty to a single count of conspiracy to defraud the Internal Revenue Service.

The government said Leonard and Frank Guthman were the two who benefited from the scheme. The Guthmans are brothers-in-law of Leonard.

Most of the skimmed cash was taken to the island of St. Martin, where Leonard has a second home, the government said. In June 1991, U.S. Customs found Leonard carrying $80,000 in cash on a trip to St. Martin.

Leonard agreed to pay the government $15 million in taxes, penalties and interest, $10 million immediately and $5 million more over the next three years. Frank Guthman agreed to pay $335,000 taxes, penalties and interest.

″I made a mistake. I’m very sorry,″ Leonard, founder, owner and chief executive of the business, said as he left the courthouse.

Each was released on $10,000 bond, and sentencing was set for Oct. 20.

The crime carries a maximum penalty of five years in prison and a $10,000 fine.

IRS agents raided Stew Leonard’s Norwalk store on Aug. 9, 1991, seizing boxes of financial records. Leonard also opened a store in Danbury two years ago, but it was not involved in the scheme, the government said.

AP RADIO
Update hourly