Kenneth and Suzanne Fusco, former owners of Ken and Sue’s restaurant in Durango, have pleaded guilty to federal income tax evasion in connection with an undercover investigation by the IRS, the U.S. Attorney’s Office for the District of Colorado announced Monday.
The couple agreed to take a plea agreement and admitted to overstating their business expenses in 2014 through 2019, listing personal expenses as “customer supplies” in their accounting records, according to a 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, the release says.
The Fuscos, who pleaded guilty Oct. 13, are scheduled to be sentenced Feb. 6 in Durango’s federal courtroom. They face prison sentences ranging from 12 to 41 months; a restitution payment of $160,536, the value of the federal income taxes owed; and a fine of $5,500 up to $55,000, according to the U.S. Attorney’s Office.
Suzanne Fuscos agreed to pay the restitution in full by the time of her sentencing, according to her plea agreement. The U.S. federal government agreed to recommend the minimum sentencing to the court in addition to a reduction in Suzanne’s sentence length given that she took responsibility for evading federal taxes.
The case was prosecuted by Assistant U.S. Attorneys Nikki Cassidy in Denver and Jeffrey Graves in Durango.
The Fuscos could not immediately be reached for comment.
The Fuscos listed Ken and Sue’s restaurant for sale in early 2020. On Aug. 4, 2020, undercover IRS agents pretended to be interested in purchasing the restaurant and met with Kenneth and Suzanne at the restaurant, according to the plea agreement.
The Fuscos gave the undercover agents a tour of their building. Unbeknownst to them, one of the agents was wearing a hidden video camera. After the tour, the agent told the Fuscos he or she was concerned about the restaurant’s financial figures and how long it would take to make a return on investment after purchasing the property, the agreement recounts.
Suzanne told the agent on camera that “we’re masters at,” and Kenneth finished her sentence, saying “disguising.” Kenneth admitted, again on camera, that he and his wife used the restaurant to pay for personal expenses, the agreement says.
The IRS used the Fuscos’ recorded statements to obtain a search warrant for Ken and Sue’s restaurant, the agreement says.
On the morning of Aug. 26, 2020, an IRS criminal investigations unit raided Ken and Sue’s at 636 Main Ave. Agents left the restaurant about 2 p.m. Karen Gurgle, a special agent and spokeswoman for the IRS in Denver, told The Durango Herald then, “We were there on official business executing a warrant.”
The IRS agents “seized voluminous accounting and tax records,” according to the plea agreement. Agents also interviewed the Fuscos, who each admitted to using the business to pay their credit card balances, which they had “used extensively” for personal expenses.
Suzanne and Kenneth Fusco admitted they listed their credit cards as “customer supplies” in their QuickBooks tax documents. They also admitted to keeping the categorization of their credit cards secret from their tax return preparers, the agreement says.
Ken and Sue’s operated in Durango for more than 20 years. Earlier in 2020, before the restaurant was raided by the IRS, the Fuscos had announced plans to sell the business and retire.
Today, Kurtis Murphy owns 636 Main Ave, a new bistro business that carries on the legacy of Ken and Sue’s restaurant. Murphy was the top chef under the Fuscos’ ownership.
In a statement emailed Tuesday to The Durango Herald, the restaurant said 636 Main Ave is a new restaurant and the owners have no knowledge of the previous business dealings.
“During the years discussed, Kurtis and Krista Murphy were living and working in Telluride,” the email said.
Efforts to reach Murphy on Tuesday were not immediately successful.
During an interview with the Herald in March, Murphy said he wants to maintain the “casual fine dining” experience Ken and Sue’s offered patrons for more than two decades.
He said he wanted to retain mainstay menu items, bring back customer favorites and make tweaks and upgrades to desserts and other menu items.
cburney@durangoherald.com
