Connecticut Store Owner Sentenced in Tax Fraud - The New York Times
9/24/15, 4:06 PM
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October 21, 1993
Connecticut Store Owner Sentenced in Tax Fraud
By JACQUES STEINBERG,
NEW HAVEN, Oct. 20— Stew Leonard Sr., whose circuslike Connecticut dairy stores made him
a folk hero of American retailing, was sentenced today to more than four years in prison and fined
$947,000 for his role in a sophisticated tax-fraud scheme.
The prison sentence, five months shy of the maximum recommended by Federal guidelines,
cemented a remarkable fall for Mr. Leonard, whose reputation was shattered this summer when he
and three executives pleaded guilty to skimming more than $17 million in sales from the family's
Norwalk store.
The scheme, a decadelong effort to defraud the Federal Government that involved customized
computer programs, destruction of records and bags of money smuggled to the Caribbean, was the
largest criminal tax case in state history and the largest computer-driven tax-evasion case in the
nation, the authorities said.
The sentencing of Mr. Leonard and his three former associates, two of whom are brothers of his
wife, came as new details of the case surfaced, including that Stew Leonard Jr., the president of the
company, had participated in the scheme but had received immunity from prosecution as part of
the July plea agreement. The documents indicated that the younger Mr. Leonard had been kept
informed about the scheme and had altered sales figures to cover it up.
The elder Mr. Leonard, 63, who recently underwent hip surgery, used a metal cane to support
himself as he told Judge Peter C. Dorsey of Federal District Court in a barely audible voice that he
was "deeply sorry" for the pain he had caused. The extent of his wrongdoing was brought home to
him, he said, when a granddaughter asked recently, "Grandpa, why do you have to go to jail?" 'I've
Hurt My Family'
"I've hurt my family," he said, beginning to sob as he turned to face two rows packed with relatives.
"I've hurt my children. I've hurt my customers."
"Somehow," he said a moment later, "I'm going to make it up to everyone."
While acknowledging Mr. Leonard's flagging health, as well as his past contributions to charity,
Judge Dorsey imposed a stiff sentence, saying Mr. Leonard had committed "a very flagrant
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Connecticut Store Owner Sentenced in Tax Fraud - The New York Times
9/24/15, 4:06 PM
violation of the law" that had taken "calculation" and "planning."
"Sometimes I look for an explanation," the judge added. "I haven't heard one yet."
Judge Dorsey sentenced Mr. Leonard to four years and four months in prison, followed by three
years of supervised release, or probation, that will include four hours of community service a week.
He also ordered Mr. Leonard to pay $947,000 in fines, including about $97,000 to cover the costs
of his imprisonment.
A Federal probation official estimated that, with time off for good behavior, Mr. Leonard would
probably serve about 44 months. If he is imprisoned as scheduled on Nov. 29, he could be eligible
for supervised release in 1997.
Mr. Leonard's lawyer, James F. Neal, said he did not know if his client would appeal the sentence.
Mr. Leonard had previously agreed to pay the Government $15 million in taxes, penalties and
interest on the skimmed receipts.
Next month the 34-year-old Norwalk store, Stew Leonard's Dairy, must also answer charges,
lodged by state consumer authorities, that it overcharged customers on a variety of items, ranging
from ham salad to lox. Weighing the Sentence
Word of the sentencing quickly spread today to the store, which has been hailed as a model of
retailing that is sensitive to customers' desires. It was praised in the 1982 book "In Search of
Excellence," by the management experts Thomas J. Peters and Robert H. Waterman Jr. The store - which sells 10 million quarts of milk and 100 tons of cottage cheese a year -- has long captivated
adults with its free samples and bins brimming with produce, and has wowed children with its
singing, mechanized farm animals and petting zoo.
Although the rain-slicked parking lot was less crowded than usual, customers continued to roam its
one continuous aisle, where they weighed the gravity of Mr. Leonard's sentence.
"I'm sad for him, but that's the way it is," said Maryann Hall of Westport. "We make mistakes and
we pay for them."
Mr. Neal has said that Mr. Leonard has been in semi-retirement for some time and that the family's
operations, including a 2-year-old store in Danbury, would be unaffected by his guilty plea.
The younger Mr. Leonard's leadership of the business was apparently assured by the July plea
agreement, which gave him immunity from prosecution despite his "participation in the
conspiracy," according to Government documents.
A 35-page Government report, filed on Tuesday in advance of the sentencing, said that notes
written by and addressed to the younger Mr. Leonard had been discovered on internal analyses of
the scheme and that he had, at times, executed the computer program that doctored the store's
reported revenues.
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Connecticut Store Owner Sentenced in Tax Fraud - The New York Times
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The younger Mr. Leonard did not return phone messages left for him today at his home and office.
Trips to St. Martin
The Government filing also recounted that on "tens if not hundreds of trips to St. Martin," where
the elder Mr. Leonard had a second home, he and several co-conspirators smuggled "packages of
money in amounts ranging from $10,000 to upwards of $250,000" in suitcases or even disguised
as baby gifts. The money, once in St. Martin, was untraceable.
In addition to the elder Mr. Leonard, who had been the company's chief executive and chairman,
the other executives who pleaded guilty in the scheme were Frank Guthman, 52, Mrs. Leonard's
brother and a former executive vice president of Stew Leonard's, who was sentenced to three years
and five months in prison; Stephen Guthman, 60, another brother and the former chief financial
officer, who was sentenced to 18 months in prison, and Tiberio "Barry" Belardinelli, a former
general manager, who was sentenced to two years' probation.
Photos: The proprietor of Connecticut's popular dairy stores, Stew Leonard Sr., was sentenced
yesterday to four years and four months in prison after pleading guilty this summer to skimming
more than $17 million in sales from the family's Norwalk store; Stew Leonard Sr. outside Federal
Court yesterday in New Haven. (Photographs by Carl David LaBianca for The New York Times)
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