Hooters millionaire goes on trial
The IRS says L.D. Stewart, one of the restaurant's six founders, hid $11-million in income over two years and owes about $4-million.
By JENNIFER LIBERTO
Published November 1, 2005
TAMPA - It wasn't the combination of chicken wings, women and beer that got Lynn "L.D." Stewart into trouble. Not the tight, skimpy T-shirts. Not the special sauce, which the Hooters founder had concocted himself.
It was the way he tried to protect all that money he made from selling the Hooters name.
A tanned and blond Stewart, 62, of Oldsmar, stood trial Monday on two counts of tax evasion and two counts of filing false income taxes.
The IRS says he owes about $4-million more than he paid in 1997 and 1998. He's accused of failing to report $11-million in income over those two years, which was earned through selling his stock and ownership in Hooters Inc.
He allegedly hid the money in foreign offshore trust accounts.
Federal prosecutors say Stewart participated and even directed his accountant to take part in a complicated tax evasion scheme that "reduced his taxes to ridiculously low levels."
Stewart says he's innocent, because he did not "knowingly and willingly" evade tax laws, and followed what he believed was legitimate tax advice, according to defense attorney John Fitzgibbons. Stewart says he merely listened to his experts. One was his accountant, now a felon. The other was his attorney, now dead.
Stewart faces up to five years in prison for each tax evasion charge and another three years for each false income tax return claim - up to 16 years total. He also could be fined up to $250,000 per charge.
The entire Hooters concept grew out of an idea hatched by six men connected by various development projects and family relationships.
They thought: What if we combined our favorite things? Good food served by good-looking women.
L.D. Stewart and five friends agreed to pool their money to open the first restaurant in 1983 at 2800 Gulf to Bay Blvd. in Clearwater.
Before Hooters took off, Stewart had been working as a painting contractor.
His claim to fame was playing for the University of Illinois football team when the Illini won the Rose Bowl in 1964.
Hooters became the multimillion-dollar company it is today after a restaurant industry executive happened to stop by the Clearwater eatery in 1984 and persuaded the owners to let him buy the rights to franchise Hooters outside the Tampa Bay area. That company, Hooters of America, has its headquarters in Atlanta and has franchised more than 375 restaurants in 46 states.
Yet, by 1994, Stewart had tired of bickering with fellow partners and he wanted out, attorneys say. After much litigation, Stewart, his partners and Hooters of America struck a complicated deal.
Hooters was ordered to pay Stewart $10-million for his ownership rights, to be distributed over five years in monthly installments plus interest, federal prosecutor Jay Hoffer said.
"He basically won the lottery," said Fitzgibbons, who described how Stewart's next move was to sit down with his accountant, Michael Maricle, to discuss ways to conserve his new income.
Prosecutors say Maricle was under orders to find aggressive ways to reduce what Stewart would owe the federal government.
"The defendant (Stewart) would direct Maricle what level of income he felt comfortable in reporting," Hoffer said.
Stewart's untaxed income was moved into offshore accounts, which is legal if it's declared to the IRS. Stewart's accounts weren't. In fact, they were hidden through a "daisy chain of trust accounts," Hoffer said.
Fitzgibbons argues that Stewart had no idea that what Maricle was doing was illegal. He describes Stewart as an entrepreneur and an "ideas man" who left money managing to his accountant. The Hooters patriarch hasn't written a check in about 20 years, Fitzgibbons told a federal jury Monday.
Fitzgibbons spent much of his opening statement attacking Maricle, whom he called the government's "star witness."
Maricle pleaded guilty in 2003 to two counts of helping prepare and file false tax returns and was sentenced to 30 months in prison in 2004. But Maricle has yet to serve a day in prison. His sentence could be shortened by prosecutors, depending on how he cooperates, Fitzgibbons said.
Fitzgibbons also said he plans to show later in the trial how Maricle also stole about $600,000 from Stewart over the years and Stewart had no idea.
"We will find out how good (Maricle) is at telling the truth," Fitzgibbons said.
--Times researcher Angie Drobnic Holan contributed to this report.