Ex-Pizza Pizza executive fined for evading tax

Lawrence Austin, once second in charge at Pizza Pizza, pleaded guilty to hiding income of $677,343 he received from the fast food giant in the 1990s. That means he failed to pay about $200,000 in taxes and must now turn over that amount, plus a $200,000 fine.

The Toronto Star
September 26, 2008

Ex-Pizza Pizza executive fined for evading tax
Saying Lawrence Austin 'cheated' public, judge fines him $200,000
Kevin Donovan


Lawrence Austin, once second in charge at Pizza Pizza, leaves Old City Hall in 2006. He was finded $200,000 yesterday for hiding income. Lucas Oleniuk/Toronto Star File Photo

A Toronto businessman who cut a swath through the Canadian fast food world is guilty of cheating the public of tax revenues and must pay a hefty fine, a judge has ruled.

Lawrence Austin, once second in charge at Pizza Pizza, pleaded guilty to hiding income of $677,343 he received from the fast food giant in the 1990s. That means he failed to pay about $200,000 in taxes and must now turn over that amount, plus a $200,000 fine.

"It's another chapter in my life that is ended," said Austin, 59, a flamboyant dealmaker who counts the growth of Pizza Pizza as one of his greatest victories and his long-ago racketeering conviction in Florida as one of his saddest moments. "I look forward to moving ahead with a clean slate," Austin said outside the courtroom.

Mr. Justice William Bassel accepted an agreed statement of facts submitted by prosecutor Robert Goldstein and Austin's lawyer David Tice. Bassel said that when people do not pay their taxes, "the public is cheated." The hefty fine was sufficient, Bassel said, though he noted that when there is a "defrauding of the public" a jail sentence can be imposed.

The agreed statement describes the involvement in the case of Austin's old friend, Pizza Pizza president Michael Overs. It turns out that some of the money prosecutors originally thought Austin had pocketed only flowed through Austin's accounts and was directed back to Overs. Court did not hear why.

It changed the prosecution's case against Austin, lowering the amount of money at issue, court heard.

Two years ago, when Austin was charged, the allegation was that he had evaded taxes on $1.5 million of payments from Pizza Pizza. While preparing their case, prosecutors learned that Overs had stepped forward in 2004 and disclosed that about one-third of the money paid to Austin had flowed back to Overs.

In what is known as a "voluntary disclosure," Overs paid the Canada Revenue Agency the money he owed. As a result, Overs did not face prosecution. Overs' lawyer, Brian Heller, declined to comment on the matter and Overs did not return a call and email to his office.

The case that ended at Old City Hall courthouse yesterday was as much about the on-again, off-again friendship of Austin and Overs as it was about taxes.

"I don't think we will ever know the true extent of their relationship," said federal prosecutor Robert Goldstein.

Court heard how Overs started Pizza Pizza in 1967 and then, in the 1970s, spotted an advertisement in a local Toronto newspaper placed by a young "Lorn Austin" (Austin has used several variations of his name over the years) who claimed to be a whiz at franchising. Austin had a degree in television repair from a college, but had fallen in love at a trade show with the concept of growing businesses by franchising.

Austin and Overs teamed up and built Pizza Pizza into a large chain that made good pizza and a great deal of money. Austin's lawyer told court that his client "led Pizza Pizza through a great time of expansion" and introduced a series of new products and brought franchises to universities and other "non-traditional" locations.

Court also heard about a series of "famous newspaper articles" in the Toronto Star in the 1990s, which detailed Austin's background and a dispute between the company and franchisees.

Austin had moved to Florida by the early 2000s when a routine audit of Pizza Pizza turned up the $1.5 million in payments to Austin and his private companies between 1993 and 1997. Auditors checked Austin's tax filings. Seeing no sign of the payments, investigators were assigned and after a lengthy probe he was charged with tax evasion in 2006.

As prosecutor Goldstein moved toward preliminary hearing and an eventual trial, he and the investigative arm of the federal taxman learned from another arm of the Canada Revenue Agency that Overs had received some of the money back from Austin.

All told, Overs said in his disclosure, $567,205 paid to Austin went back to Overs. Overs reported most of that income, except for $87,000. Overs, a millionaire many times over, then paid the $27,000 he owed in back taxes. Canadian law allows taxpayers to make "voluntary disclosures" of this sort without penalty or prosecution.

Prosecutors also decided that some of the money they thought Austin should have paid tax on was "expensed for legitimate business activities." In the end, Austin pleaded guilty to making false statements on two years of tax returns.

Austin is to pay the back taxes of $200,000 immediately. He has two years to pay the $200,000 fine.

Now living in Boca Raton, Fla., Austin is growing a submarine sandwich franchise that will shortly be introducing pizza on its menu.

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