John Zelepos, owner of Mystic Pizza, the Connecticut pizzeria that inspired the 1988 film that launched Julia Roberts’ career, was sentenced Monday to a year in federal prison for tax evasion.
Federal authorities released financial data that depicts the famous pizza parlor as a cash generator for 49-year-old owner John Zelepos, who settled previously with his employees in a separate matter after the state labor department accused him last year of paying below minimum wage and withholding overtime.
In a long and detailed legal memo urging a substantial prison sentence, federal prosecutor Peter S. Jongbloed wrote that over the five-year period examined by IRS investigators, Zelepos reported an average of more than $470,000 a year in taxable income. He reported about $299,000 during his worst year and about $785,000 in his best.
He is accused of evading about $234,407 in federal taxes, in part by trying to hide money in business and family accounts. Over about one year, beginning in January 2010, the government said Zelepos moved $522,658 in 61 transactions involving cash deposits of less than $10,000. Federal law requires the reporting of transactions greater than $10,000.
Zelepos also is accused of writing off $162,000 as the cost of salaries to his mother and brother when, prosecutors said, neither worked at Mystic Pizza.
The sentence by U.S. District Judge Victor A. Bolden means Zelepos will likely serve around 10 months. He also was ordered to pay a $25,000 fine and forfeit $522,658. Zelepos has paid $234,407 in tax restitution but owes more in taxes and penalties.
Jongbloed said Zelepos, a married father of three, drives a Porsche, owns two more cars, and lives in a $750,000 home in North Stonington. He also owns a property management company, which owns and manages four properties, two of them rental properties valued at $1.3 million.
“The defendant’s financial statement makes crystal clear he is a financially wealthy person who has no valid financial reason for not paying all his federal taxes,” Jongbloed said. “Simply put, the defendant had the money to timely pay his full taxes.”
Defense lawyer William F. Dow III said Zelepos made a mistake but deserved leniency in part because of his community spirit and all the hard work he put into making the pizza restaurant a success.
“It would be easy, but wrong, to assume that John Zelepos’ financial success resulted from distribution of a Julia Roberts romantic comedy film entitled ‘Mystíc Pizza,’ ” Dow said. “While it is true that the film has for some achieved iconic status, the success of John Zelepos’ Mystic Pizza Restaurant results not from that notoriety but from John’s strong work ethic.”
Dow said Zelepos has paid the taxes owed and “is committed” to paying the penalties and interest. Dow urged Bolden, sitting in Bridgeport, to impose a sentence that did not involve prison.
Zelepos was charged with attempted tax evasion and structuring transactions to avoid federal reporting requirements.
Zelepos’ father, Stephen, opened Mystic Pizza in 1973. It began as a solid if unremarkable family eatery at the west end of the village’s tourist strip. The 1988 film about teenage girlfriends who work at the restaurant while growing up in the state’s southeast corner made it a tourist attraction..
Zelepos’ brother will operate Mystic Pizza while Zelepos is imprisoned, according to materials filed in court.