A Hampton man who owned restaurants in Massachusetts and Seabrook pleaded guilty Friday to defrauding the IRS and the Massachusetts Department of Revenue over six years.
John Drivas, 66, pleaded guilty to five counts of failure to collect and pay employment taxes owed to the IRS and four counts of wire fraud for state meals taxes he collected from restaurant customers but failed to pay to the state Department of Revenue.
He is scheduled to be sentenced on Dec. 5
According to the U.S. attorney’s office, Drivas was the owner and operator of three restaurants — Red’s Sandwich Shop in Salem, Massachusetts, Red’s Kitchen and Tavern in Peabody, Massachusetts, and Red’s Seabrook in Seabrook — between January 2016 to October 2022.
He was the sole shareholder of the Salem restaurant until he sold it to an employee in September 2022. He was the 100% owner of the Peabody restaurant with his wife and the 52% owner of the Seabrook restaurant with his children.
Prosecutors alleged Drivas paid wages to numerous employees of the restaurants partly by payroll checks and partly in cash and did not report the cash wages to the IRS or pay employment taxes on them.
Federal tax law requires employers to withhold from any employee wages an amount for income taxes and other amounts for Social Security and Medicare taxes.
Prosecutors allege Drivas caused employment tax losses of $439,341.
Drivas also collected more than $1.5 million in state meals taxes paid by restaurant customers which he failed to pay over to the state as required by law. In Massachusetts, all owners and operators of restaurants and bars are required to collect 6.25 sales taxes on meals. Salem and Peabody also require restaurants and bars to collect an additional 0.75% local option meals excise tax. Although Drivas collected the taxes from restaurant customers, prosecutors allege he intentionally withheld $1,596,775 of those taxes from monthly reports and payments owed to the Massachusetts Department of Revenue.
The charge of failure to pay taxes carries a maximum potential sentence of five years in prison, three years of supervised release, and a fine of $250,000 or twice the gross gain or loss and restitution. Each wire fraud charge is punishable by up to 20 years in prison, supervised release for three years, a fine of $250,000 or twice the gross gain or loss, and restitution. Sentences are imposed by the federal district court judge based upon the U.S. Sentencing Guidelines and other statutory factors.
The case was investigated by acting U.S. Attorney Joshua S. Levy, Harry Chavis, special agent in charge of the IRS criminal investigation, Boston Field Office and Katherine Mulligan, chief of investigations for the Insurance Fraud Bureau of Massachusetts. Assistance was provided by the Criminal Investigations Bureau of the Massachusetts Department of Revenue.
Assistant U.S. Attorney Victor A. Wild of the Securities, Financial & Cyber Fraud Unit is prosecuting the case.
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