The founder of the iconic South Philadelphia cheesesteak spot Tony Luke’s and one of his sons were charged Friday with hiding more than $8 million in revenue from the IRS for over a decade.

Federal prosecutors said Anthony Lucidonio Sr., 82, known as “Tony Luke Sr.” or “Papa Luke,” and Nicholas Lucidonio, 54, kept two sets of books to hide cash they raked in for their signature sandwiches at their storefront at Oregon Avenue and Front Street.

The duo was also accused of paying their employees large portions of their salaries in under-the-table cash to evade payroll taxes.

Tony Luke Jr., the prominent face of the brand, whose business relationship with his father and brother soured in 2015, was not named in the indictment.

The indicted Lucidonios, both of New Jersey, declined to comment Friday. Their lawyers, Ian M. Comisky and Walter Weir Jr., disputed the prosecutors’ claims and said in a statement that their clients looked forward to challenging them in court.

“Tony and Nicky have fully cooperated with the government’s investigation since its outset,” the lawyers said. “The Original Tony Luke’s will continue to serve its faithful clientele and provide gainful employment to its employees and their families.”

The case is just the latest in a series of IRS investigations that have uncovered significant tax fraud at some of the region’s landmark family-dining brands.

Five owners of the ’50s throwback chain Nifty Fifty’s were sent to prison in 2013 for concealing more than $15 million from tax collectors. Four years later, Charles Bangle, owner of Jersey Shore pizza chain Manco & Manco, was sentenced to 15 months for hiding close to $1 million.

Tony Luke’s, which Lucidonio Sr. opened in 1992 underneath I-95, grew into a global franchise with more than a dozen locations in Pennsylvania, New Jersey, Washington, D.C., Maryland, Texas, and Bahrain.

Lucidonio Jr. spearheaded much of that expansion, handling marketing and franchising while his father and brother maintained day-to-day operations at the original storefront. There are now two companies: The Original Tony Luke’s operates the Oregon Avenue store, while the Tony Luke’s franchises are run by Lucidonio Jr.

Anthony Lucidonio Jr., who was not indicted Friday with his father and brother, with a box of Tony Luke's frozen cheesesteaks in 2009.
Michael Bryant/inquirer
Anthony Lucidonio Jr., who was not indicted Friday with his father and brother, with a box of Tony Luke's frozen cheesesteaks in 2009.

The elder Lucidonio and his son Nicholas sought to hide the success of the original restaurant for over a decade — at least in its financial records, prosecutors said.

According to the indictment, the Lucidonios purposefully kept cash earned in their original storefront out of their business bank accounts between 2006 and 2016, and developed a complicated method of paying their workers to avoid tax burdens.

Only a portion of employees’ hours would be reflected on the checks they received each payday. Workers were allegedly instructed to endorse those checks back to their manager, who would redeposit them in the business’ accounts and then hand employees envelopes of cash reflecting compensation for the real number of hours they worked.

When Lucidonio Jr. was fired from the family business in 2015 in a dispute over franchising rights and royalties from the Tony Luke’s brand, his father and brother became so concerned their scheme would be exposed in the resulting court battle that they amended several tax returns to reflect their true earnings, prosecutors said.

But they attempted to offset their new tax obligations by claiming phony business expenses, according to the indictment.

The Lucidonios are facing more than 20 felony counts, including conspiracy, filing false tax returns, and tax evasion, and could face up to five years in prison if convicted on the most serious charge.

They are expected to surrender for an initial court appearance next week.

Read the indictment: