Joseph Jerome Hardesty, who built a thriving Annapolis restaurant business, acknowledged yesterday that for years he skimmed cash from his ventures, eventually pocketing more than $2 million that was never reported to the federal government.
Hardesty, 58, pleaded guilty in U.S. District Court in Baltimore to one count of tax evasion for underreporting his 1997 income by nearly $400,000. Federal investigators said that since 1992, Hardesty had hid $2.06 million from the government by ordering his staff to delete receipts from the computerized bookkeeping system, then locking the extra cash in an office filing cabinet.
"It kind of takes one's breath away, the scope of this," U.S. District Judge Andre Davis said in accepting Hardesty's plea. Davis said that Hardesty had to have known he would someday end up in court.
"Your honor, I was just plain stupid, dumb," replied Hardesty, owner of the popular Middleton Tavern and Fran O'Brien's Oyster Bar at the busy Annapolis City Dock. "I don't know how to summarize it any better."
Hardesty, who also runs the annual Annapolis and Ocean City wine festivals, could receive five years in prison when he is sentenced Sept. 8.
In exchange for his guilty plea, Assistant U.S. Attorney Joseph L. Evans said the government would recommend the minimum term of 18 to 24 months.
Hardesty could be fined and ordered to pay the Internal Revenue Service more than $1 million. Although he pleaded guilty only to one count involving his 1997 taxes, Hardesty agreed as part of yesterday's plea agreement to repay the full $598,000, plus interest, owed on the $2 million in unreported income.
Domenic J. LaPonzina, an IRS spokesman, said that in addition to a standard penalty of about 6 percent, the IRS could collect fraud penalties totaling half to three-quarters of the original bill.
It wasn't clear yesterday whether Hardesty, who is known as Jerry, will continue to operate his restaurants or the wine festivals. Outside the courtroom, Hardesty and defense attorneys George Petros and Nicholas Kallis declined to comment.
Hardesty had little to say in court. He disclosed to the judge that he has dyslexia and has great difficulty reading. But he said that he understood the terms of his plea agreement.
He did not explain why he took the money or what he did with it. Evans said in court that Hardesty reinvested much of the money in his businesses.
The IRS investigated Hardesty for more than two years, tipped off by at least two sources whom Evans declined yesterday to identify. In February last year, IRS agents raided Hardesty's restaurants, seizing business and personal computers, paperwork and cash.
Among the items they found was a green ledger in which Hardesty's staff had recorded receipts and cash collected from the restaurants and the wine festivals -- figures that Hardesty's accountant and the IRS had never seen.