Joseph Smith, Tax Evasion and Wire Fraud Conspiracy, New York 2023

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Table of Contents

Joseph Smith, a former owner of New York Bagel, has pleaded guilty to tax evasion and wire fraud conspiracy in New York.

A federal court in Pennsylvania heard that between 2014 and 2016, Smith deposited over $1.3 million in franchise fees into New York Bagel bank accounts he controlled. However, instead of using these funds for business expenses, Smith spent them on personal items such as rent for his personal home, recreational travel, car payments for personal vehicles, and everyday living expenses.

Smith also allegedly induced prospective franchisees to open up New York Bagel stores by understating the startup costs, overstating the number of franchises that were up and running, and exaggerating the financial success of existing franchises. He charged prospective franchisees fees ranging between $7,500 and $44,500 to gain rights to open stores. When prospective franchisees learned of the misrepresentations, Smith refused to refund these fees.

Smith’s business partner, Dennis Mason, previously pleaded guilty to wire fraud and conspiracy to commit wire fraud on June 25, 2020. Smith is scheduled to be sentenced on May 24, 2024, and faces a maximum penalty of five years in prison on both the tax evasion and conspiracy charges, as well as a period of supervised release, restitution, and monetary penalties.

The case is being investigated by IRS-Criminal Investigation and prosecuted by Trial Attorney Eric B. Powers of the Justice Department’s Tax Division and Assistant U.S. Attorney David Ignall of the U.S. Attorney’s Office.

The exact amount of restitution and monetary penalties Smith will face remains to be determined. However, it is clear that his actions have had serious consequences for those who invested in his business.

Smith’s guilty plea is a significant development in this case, and it serves as a reminder of the importance of accountability in business dealings. By pleading guilty, Smith has acknowledged his role in the conspiracy and has taken a step towards making amends.