Eklunds enter pleas to a misdemeanor

The owners of the Chequit and Ram’s Head inns, James and Linda Eklund, pleaded guilty in October in federal court to misdemeanor charges of failing to report required information on a tax return. Felony charges against them have been dropped.

They are scheduled to be sentenced in February, according to the U.S. Attorney’s Office for the Eastern District of New York.

An October 2010 indictment alleged that the Eklunds under-reported cash receipts at the Ram’s Head Inn for the years 2000, 2001 and 2003.

The case dates back to October 29, 2005, when Internal Revenue Service agents showed up on the Island to confiscate evidence at the two inns.

Mr. Eklund owns a construction company with partner Peter Reich, a town councilman, and Ms. Eklund is a member of the School Board who recently won re-election. They have been involved in community projects and programs as volunteers and donors over many years.

“James and Linda Eklund have reached an agreement with the U.S. Attorney’s office to end an investigation which the Internal Revenue Service began more than six years ago,” said Mr. Eklund’s attorney, Peter Tomao, of Garden City in a statement issued Tuesday in response to a request for comment. “This agreement will allow them to put the investigation behind them and move on with their lives. They thank their family and friends for their support.”

“Rumors regarding this investigation have been rampart.” Mr. Tomao said. “Here are the facts. Linda and James failed to disclose information regarding a cash payroll on the tax return for 2001 which they filed in connection with the operation of the Ram’s Head Inn. As Mr. Eklund explained to the court on October 4, 2011: ‘There was a failure to disclose the cash payroll of the Ram’s Head Inn, and a further failure to disclose the income from the Ram’s Head Inn that was used to fund that cash payroll.’”

According to Mr. Tomao’s statement, “Mr. Eklund went on to explain to the court that the tax return failed to report income to the IRS ‘by the amount of the cash payroll.’ Since the amount of the payments would have been deductible as an expense, it is not anticipated that the total net income was under-reported. There is no way to know whether the employees who received some or all of their pay in cash reported that income.”

Mr. Tomao said the IRS investigation did not involve Reich/Eklund Construction, Inc., which is a separate corporation and filed separate tax returns.

“This matter has dragged on for years,” Mr. Tomao said in the statement. “By entering their pleas, James and Linda Eklund wanted to end this case, which has dragged on for years and led to numerous unfounded rumors. Linda and James have made numerous contributions over many years to improve the quality of life on Shelter Island. They want to continue to do so.”

Mr. Eklund commented in a phone interview Monday that his family had “endured this situation over six years. Every time you get to time to move along, something comes along and rips off the scab.”

He said that the IRS had acted against them initially because of allegations from an informant that turned out to be “a bill of goods. It wasn’t true. What was found,” he added, “was that we’d paid in cash” — a practice that he noted was widespread in the restaurant business.

Mr. Eklund said that he and his wife felt they’d had a chance of winning a trial “if we’d had the wherewithal” to pay for one.