The former owners of Ken & Sue’s restaurant in Durango were sentenced to five years’ probation for tax evasion Tuesday in a Durango federal courtroom.
Kenneth and Suzanne Fusco were also sentenced to six months of house arrest, 150 hours each of community service and fined $25,000 each.
The couple pleaded guilty to tax evasion in a plea agreement Oct. 13 with the U.S. Attorney’s Office. They admitted to overstating their business expenses from 2014 through 2019, listing personal expenses as customer supplies in their accounting records, according to an October news release from the U.S. Attorney’s Office. Unreported income totaled $933,586, resulting in a tax loss to the government of $160,536.
Based on terms of the plea agreement, they faced up to three months in jail. Before signing the plea agreement, the couple faced a prison sentence that ranged from 12 to 41 months and a fine between $5,500 and $55,000. Tax evasion is a class D felony.
The couple paid the amount owed to the IRS before Tuesday’s sentencing, in accordance with the plea agreement reached with the U.S. federal government, which agreed to recommend the minimum sentence. Lawyers for both defendants made motions for “below guidelines” sentencing, asking for a maximum of five years’ probation.
The Fuscos listed Ken & Sue’s, which they had operated for 20 years, for sale in early 2020. On Aug. 4, 2020, undercover IRS agents pretended to be interested buyers, and wearing hidden cameras collected incriminating information that led to a warrant and eventual indictment.
The couple was represented by separate counsel in their joint court appearance and sentencing on Tuesday. Both lawyers along with Ken and Suzanne made statements before sentencing. Honorable Judge Robert Blackburn warned lawyers that he had thoroughly read all of the documentation related to the case and did not want to hear any “reiteration” of said documents.
“A lifetime of good outweighs perceived need for incarceration,” Ken’s attorney said before citing all the good the restaurateurs have done for employees and the community over the years.
He said that since the indictment and publicity surrounding the case, the couple had become recluses, no longer going to their usual stores or restaurants because they felt embarrassment, shame and humiliation for their conduct.
“The idea of a short jail sentence is much more severe than the reality of it,” he said. “The reality of five years’ probation and a felony conviction is far more onerous.”
Ken Fusco followed with his statement.
“I would like to apologize for my actions and what we’ve done,” he said. “We know we made a mistake on what we were claiming.” He said the couple had gotten “overwhelmed” and had a hard couple of years. “I apologize to the court and the American people.”
Suzanne’s attorney said the couple have made an “extraordinary effort” to have a positive impact on their family and community. She said her client was deeply remorseful and called her client law-abiding, hardworking and from humble beginnings.
“She did commit a crime and admits it, but it doesn’t discount the good she and her husband have done in this community for decades,” she concluded before also asking that her client receive five years’ probation.
Suzanne Fusco followed with her statement.
“I’m sorry for what I’ve done,” she said as her voice broke with emotion. “And I wake up every day feeling sick and full of regret.” She went on to say she was embarrassed to face friends and community members.
Assistant U.S. Attorney Jeffrey Graves addressed the court next.
“A lifetime of good, no matter how good, doesn’t dismiss the wrongs,” Graves said. He called it a scheme perpetrated for years to hide more than a million dollars. “It’s not just them getting overwhelmed as Ken stated in court today. It’s intent over and over again. ‘We are masters of disguise’ they told the IRS undercover agent.”
Graves called the 12 to 18 month prison sentence guidelines appropriate. He called the couples’ motive “greed” and deserving of a more serious penalty.
“We have a system of law and not indulgences,” Graves said. “What could they have done for their community? Paid their fair share of taxes.”
Graves went on to say he had “no doubt probation will be a piece of cake for them.” He then agreed the couple have done good things for the community and that it should be taken into account in lowering their sentence. He recommended three months of incarceration followed by supervised release, and added that probation alone was not adequate.
Blackburn talked about the temptation to underreport earnings but called the Fuscos transgression a “collision between greed and vanity.” They should have realized what they were doing was “immoral and illegal,” he said. “But they only quit when they were caught.”
Blackburn called tax evasion of any kind an assault on the U.S. Treasury, and said everyone else has to hold their noses and pay.
“Millions of law-abiding taxpayers do it every year,” he said.
Blackburn said he was considering probation versus three months custody, which he called reasonable under current federal sentencing statute.
Blackburn then accepted the plea agreement and the defendants’ motions for sentences below guidelines before passing his sentence. The six months of house arrest includes exemptions for education, employment, religious services, medical and mental health visits, consultation with lawyers, courts, probation officers, and other approved activities.
“Each of you needs to understand clearly that probation is not a God-given right, it’s a privilege not to be exploited,” he said. “Violate one thing and you could be sentenced to a lengthy term in federal penitentiary. Don’t take this personally but I hope never to see either of you again ... but if you are back before me for a probation violation – bring your toothbrush” because you will be going to prison, he said.
gjaros@durangoherald.com
