PRIMOHOAGIES & Nick Papanier Sr. Tax Evasion: A Clarification
We received an email from Nixon Peabody attorney Craig Tractenberg regarding our recent posts on the PrimoHoagies founder Nick Papanier, Sr.* and his conviction last year on charges of tax evasion.
Attorney Craig Tractenberg stated:
“Nellies is a company which sells products to Primo, to franchisees and to unaffiliated third parties like restaurants, grocery stores and the like. No franchisee ever paid Nellies in cash. No franchisee money was taken from Nellies. No money intended to be paid by a franchisee to Nellies was ever diverted or taken. The collection of cash by people who paid Nellies has nothing to do with Primo Hoagie, which is only one of many customers of Nellie’s.
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“The US Attorney made reckless statements. Nothing in the case supports those statements. You continue to make them. For this reason, you continue to defame Primo, and the many franchisees who work honestly to build a brand. You hurt franchisees by tying a tax fraud having nothing to do with Primo to the Primo brand.”
However, when asked about Mr. Tractenberg’s allegations, Matthew Reilly, Deputy Public Affairs Officer, U.S. Attorney’s Office/District of New Jersey, said they stand by the accuracy of their press release.
Mr. Reilly wrote:
The press release is still accurate. The press release says Nellies sold products to Primo and other customers, which is accurate. It says he diverted money paid by his customers from his company to his personal use and avoided taxes on that money, which is accurate.
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They’re saying that of the money that customers paid to Nellies, none came from Primo franchisees. There is nothing in the public record that confirms or refutes that claim..
No one from Primo’s franchisees has ever contacted us and asked us change that press release, which has been up on our public website for more than a year.
In fairness to PrimoHoagies, it should be clarified that Papanier’s tax fraud case did not appear to contain evidence that PrimoHoagies franchisees were adversely affected by PrimoHoagie’s relationship with Nellie’s Provisions. We did not see any allegations of overcharging or unreasonable purchase requirements.
In his email, Mr. Tractenberg took issue with our posts, and made four statements challenging the U.S. Attorney’s version of events:
1) Mr. Tractenberg wrote: “The only connection between the crime and PrimoHoagie is that Nick Papanier [Sr.] founded Primohoagies.”
The U.S. Attorney apparently disagrees.
The Papanier Information document filed by U.S. Attorney Paul J. Fishman, Newark New Jersey stated:
1. At all times relevant to this Information:
a. Defendant NICHOLAS PAPANIER, Sr. was a resident of Sewell, New Jersey, and owned Primos Hoagies Franchising, a company that sold the franchising rights of Primos Hoagies. Defendant PAPANIER also owned Nellie’ s Provisions, a meat distribution company that provided all of the meat for Primos Hoagies franchises and other independent restaurants.
b. Defendant NICHOLAS PAPANIER, Sr. and his wife maintained numerous personal bank accounts at Commerce Bank, N.A. (currently TD Bank, N.A.), PNC Bank and St. Edmonds Federal Savings Bank.
2. In 2006, 2007 and 2008, defendant NICHOLAS PAPANIER, Sr .:
a. caused Primos Hoagies franchise owners to buy Thumanns meats and cheeses from Nellie’s Provisions, which the owners did, often paying in cash;
b. took significant amounts of the cash Primo Hoagies franchise owners paid to Nellie’s Provisions and deposited it into his personal bank account;
c. used the money from his personal account to pay personal expenditures; and
d. in total, diverted approximately $556,666 in cash as follows: 2006 – $56,395; 2007 – $349,264; and 2008 – $151,005.
3. For tax years 2006, 2007 and 2008, defendant NICHOLAS PAPANIER, Sr. reported to the Internal Revenue Service Form W-2 wages, interest and dividend income, and property tax information, but omitted all of the diverted cash which the defendant used for his personal benefit. Thus, he failed to disclose and report a significant portion of this income on his tax returns, thereby causing those tax returns to substantially understate the amount of income he received…
It seems to us that there was a greater connection than Mr. Tractenberg states, since Mr. Papanier, Sr. allegedly owned both companies, “caused” Primo Hoagies franchise owners to purchase from Nellie’s Provisions, then (at least according to the U.S. Attorney) used the money to pay personal expenditures.
There does not appear to be anything in the public record to either prove or disprove Mr. Tractenberg’s contention.
2) Mr. Tractenberg wrote: “No franchisee funds were paid in cash.”
Again, the U.S. Attorney apparently disagrees.
The court document stated “In 2006, 2007 and 2008, defendant NICHOLAS PAPANIER, Sr .: a. caused Primos Hoagies franchise owners to buy Thumanns meats and cheeses from Nellie’s Provisions, which the owners did, often paying in cash; b. took significant amounts of the cash Primo Hoagies franchise owners paid to Nellie’s Provisions and deposited it into his personal bank account.”
Other media outlets have also published the U.S. Attorney’s version of events. A Philadelphia Inquirer story from July, 2013 reported “Papanier, who also owned Nellie’s Provisions in Gloucester City, often received cash payments from Primo Hoagie’s franchisees when they bought salami, provolone, and other deli items from him.”
3) Mr. Tractenberg wrote: “No franchisee funds were taken and not reported.”
While Mr. Papanier Sr.’s allocution in open court neither confirms nor denies that franchisee funds were the direct source of his unreported income, the U.S. Attorney’s office stands by their published allegations.
In court documents, the U.S. attorney stated that Mr. Papanier, Sr. took “significant amounts of cash Promo Hoagies franchise owners paid” and failed to report it.
4) Mr. Tractenberg wrote: “No price issues affected franchisees.”
We did not write that any price issues affected franchisees, and did not read anything that would lead us to believe that they did.
* All references to Primohoagies is regarding Nick Papanier, Sr., not Jr. We have been notified that Nick Papanier, Sr. is no longer involved with Primohoagies.
ALSO READ:
FRANCHISE DISCUSSIONS by Company
PRIMOHOAGIES Owner of Nellie’s Provisions Pleads Guilty to Tax Fraud [Updated]
PRIMOHOAGIES Franchise Complaints [REVISED]
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As a former franchise owner I can directly refute Mr. Tractenberg’s claims that cash was not paid for provisions and other franchise-related fees. While I cannot speak for other owners, nor can I confirm that cash I paid was deposited into personal accounts, I can confirm that my franchise made multiple cash payments to Mr. Papanier during the time I owned the business. Mr. Papanier’s non-confirmation in court (as to the source of his unreported income) seems to be a condition of his plea agreement.