Peace, love and a little tax evasion: Founder of Pittsburgh donut business pleads guilty
When Ron Razete’s right-wing political views contradicted the hippie theme of his Peace, Love and Little Donuts business, it cost him some potential customers. When the shop’s $195,000 profit in 2010 contradicted his claims that he was unemployed and nearly bankrupt, it resulted in federal charges that could cost him eight years in prison.
Razete, 55, of Moon pleaded guilty in federal court Monday to underreporting his 2010 income for tax purposes and hiding his shop and its revenues from bankruptcy proceedings in 2011. As part of the plea, he will pay the IRS more than $40,000 and could face prison time.
Neither Razete nor his attorney, Laura Beth Gutnick, could be reached to comment on the plea or what effect it may have on the business.
Assistant U.S. Attorney Gregory C. Melucci said Razete reported his gross income for 2010 as $16,261, when his actual income from the doughnut business, which he and his wife opened on Smithfield Street in 2009, was more than $194,000.
In 2011, Razete filed for Chapter 7 bankruptcy, seeking to settle more than $400,000 in debts, Melucci said. But when disclosing his assets and income, Razete didn’t include any property or income associated with the doughnut shop or its franchises.
“They disclosed a business called ‘Marci’s Fun Foods,’ which closed in 2009,” Melucci said. “(Razetti) said he was self-employed/unemployed.”
When a trustee associated with the bankruptcy learned Razete was associated with the shop and its topping-heavy tiny pastries, Razete described it as only a “brand” he owned that made him less than $1,000 a month.
When it first opened, the store was controversial because of the contrast between its tie-dye “feed your inner hippie” theme and Razete’s views on politics and morals. In a post on his personal blog the day of Obama’s first inauguration, he wrote: “This crowd will not rest until Homosexuality is mainstream; until the Second Amendment is done away with; until abortion on demand is as common and accepted as going to the dentist; until sexual images and strip clubs line our streets and suburbs; until government education is started in the womb; until disagreement with their political party is ‘hate speech’ and becomes a crime; until they pass the Fairness Doctrine and rid the country of Conservative talk radio; until they transfer our sovereignty to the UN, etc. etc. etc.”
The blog has since been removed, but there were calls for boycotts among the LGBT community. Online reviews still mention Razete’s politics alongside the doughnuts.
“He was luring people in, in my opinion, with this peace, love and hippie attitude, and it worked,” said Sue Kerr, whose Pittsburgh Lesbian Correspondents blog was one of the first to draw attention to Razete.
The chain has since opened about 20 more franchised locations in Pennsylvania, Ohio, Florida, Tennessee, Oregon and Utah. Some of them, like the one in Pittsburgh’s Oakland neighborhood, tried to distance themselves from Razete, Kerr said.
Senior U.S. District Court Judge Donetta Ambrose set sentencing for Oct. 25. Razete could face a maximum sentence of 8 years in prison and a $500,000 fine, though prosecutors recommended 10 to 16 months of incarceration. The plea does not preclude the IRS from seeking additional penalties.
Ambrose agreed to release Razete pending his sentencing and will issue an order allowing him limited out-of-state travel to other Peace, Love and Little Donuts locations as needed.
Matthew Santoni is a Tribune-Review staff writer. Reach him at 412-391-0927 or [email protected].