The father-son duo behind Tony Luke’s gets nearly 2 years in prison for tax crimes unearthed in a messy family row

The father-son duo behind the iconic South Philadelphia cheesesteak spot best known as Tony Luke’s were sentenced to nearly two years in prison Thursday on tax fraud charges — the conclusion of a long-running prosecution and messy family row that now threatens the future of the operation.

Lawyers for Anthony Lucidonio Sr., 84, and son Nicholas Lucidonio, 57, said there is no one else the men trust to run the business. If they both end up behind bars at the same time, the lawyers said, they’d likely have to shutter the storefront in the shadow of I-95 from which they’ve slung their signature sandwiches for more than 30 years.

During a hearing Thursday in federal court, U.S. District Judge Gerald A. McHugh said he was open to letting the Lucidonios serve their prison terms back-to-back. But he deferred making a final decision on the question and requested further input from prosecutors.

The 20-month punishment he doled out to both men came after they admitted they’d cheated on their payroll and personal income taxes for years, hiding more than $8 million in sales.

“I’ve spent all of my life trying to provide for my family, and made some bad decisions along the way,” the elder Lucidonio, known as “Tony Luke Sr.” or “Papa Luke,” told the judge in front of a courtroom packed with friends and family members. He pleaded with McHugh, in a statement read by his lawyer, to send him to prison and spare his son a similar fate.

For his part, Nicholas Lucidonio — voice shaking, eyes wet with tears — apologized for his crimes and the damage they’d inflicted on the business his family had built over three decades.

“I hurt my family’s reputation that was built through many years of hard work,” he said. “This is the burden I carry with me every day.”

Though the duo’s tax crimes resulted in prison terms for both and an order that they pay back more than $1.3 million in back taxes to the IRS, they may never have come to light were it not for a bitter dispute over the future of the business and betrayals by other members of the Lucidonio family that eventually brought IRS agents to their door.

Lucidonio Sr. opened Tony Luke’s at Oregon Avenue and Front Street in 1992 and has since grown it into a global franchise with more than a dozen locations in Pennsylvania, New Jersey, Washington, Maryland, Texas and Bahrain.

Nicholas ran day-to-day operations at the original storefront for many of those years, while his brother Anthony Jr. became the face of the brand and the man who led its expansion.

Anthony Jr.’s business relationship with his family members soured in 2015, and he was fired.

A lawsuit followed and the company split in two — The Original Tony Luke’s, which operates the Oregon Avenue store, and Tony Luke’s franchises, which are run by Lucidonio Jr. and business partner Ray Rastelli.

The litigation later forced the family to change the name of its original location to Tony and Nick’s Steaks in 2022.

Anthony Jr.’s two sons — Anthony III and Michael, who were also employed at the sandwich empire — followed him out the door, taking copies of the company’s financial records with them and turned them over to federal investigators.

Those documents revealed that Lucidonio Sr. and Nicholas Lucidonio hid the success of their business from tax collectors by keeping two sets of books almost from the day the sandwich shop opened.

They purposefully kept cash profits out of their business bank accounts and developed a complicated method of paying their workers partly in cash to avoid having to pay taxes.

Only a portion of employees’ hours would be reflected on the checks they received each payday.

Workers were instructed to endorse those checks back to their manager, who would redeposit them in the business accounts and then hand employees envelopes stuffed with cash, reflecting the compensation for the real number of hours they’d worked.

When Anthony Jr. was fired from the business in 2015, his father and brother became so concerned their scheme would be exposed in the resulting court battle that they amended several years’ tax returns to reflect their true earnings, prosecutors said.

But they attempted to offset their new tax obligations by claiming phony business expenses.

“They’ve been lying to and stealing from the federal treasury for upward of two decades, and by extension every honest taxpayer in this country,” said Assistant U.S. Attorney John Noel Kane Jr.

Lawyers for Lucidonio Sr. and Nicholas Lucidonio urged the judge Thursday to spare both men time behind bars, saying they’d already suffered enough and suggesting that all of the sandwich shop’s 24 employees could lose their jobs should it be forced to close.

Under a clause in the 2018 settlement that resolved the lawsuit with Anthony Jr., he must be offered an opportunity to buy his father and brother out of the business should the original cheesesteak shop close for more than 10 consecutive days.

“We don’t deny on any level the seriousness of the offense,” said Walter Weir Jr., lawyer for Lucidonio Sr. “But they’re going to lose everything.”

McHugh, who acknowledged patronizing Tony Luke’s in the past, said Thursday he recognized the havoc that the case — and the dispute that spawned it — had wreaked upon the Lucidonio family and their business.

Still, the judge said, a price had to be paid.

“We rely on an honor code as part of our tax system,” he said. “If there is no consequence, people lose faith in the system.”