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Owner of Lobster Shack in Ladera pleads not guilty to sales tax evasion charges

DA says Russell Deutsch, 57, of Portola Valley failed to pay $950,628 in sales taxes due to the state

Restaurateur and Portola Valley resident Russell Howard Deutsch, who owns several restaurants, including two in Ladera (Old Port Lobster Shack and Rusty's Roadside Grill), has pleaded not guilty to sales tax evasion charges. San Mateo County prosecutors say he did not turn over to the state $950,628 in sales tax revenues over a period of eight years.

Mr. Deutsch, 57, was charged on March 22 and booked into the county jail. On March 25 Mr. Deutsch appeared in court with his wife and was released from custody on $290,000 bail after Judge Stephanie Garratt concluded that the money he used to post bail -- typically 10 percent of the total -- was from a legitimate source, prosecutors said. For collateral, the couple offered real estate, prosecutors said.

Prosecutors say that investigators found $586,809 in cash at Mr. Deutsch's home.

Christian Picone, Mr. Deutsch's attorney, takes issue with the amount of cash found. After a search of Mr. Deutsch's home and the discovery of the cash there, the Board of Equalization, the agency that collects taxes in California, gave Mr. Deutsch a receipt for $488,367, Mr. Picone said.

The board used a bill-counting machine and counted Mr. Deutsch's money at least twice, Mr. Picone said. He said he did not know the denominations of the bills.

Asked to comment on the discrepancies in the reported amounts of cash, District Attorney Steve Wagstaffe said in an email that Board of Equalization investigators found $586,809, but limited the amount they seized "to the amount known at that time to be the loss to the state by the criminal conduct."

"There's nothing illegal about having cash," Mr. Picone said. "I'm not aware of any allegation that these funds were unreported income."

Mr. Deutsch's next court appearance is set for Wednesday, March 30, for a conference, and then Monday, April 4, for a preliminary hearing, prosecutors said.

Mr. Deutsch opened the Old Port Lobster Shack restaurant in Redwood City in 2006, and subsequently opened restaurants in Ladera (in 2011), Napa and San Jose.

Redevelopment forced him out of Redwood City -- he closed the restaurant in October 2015 -- but there were plans to relocate to Los Altos this year.

In November 2015 in Ladera, a few doors down from the Old Port Lobster Shack, Mr. Deutsch opened Rusty's Roadside Grill, a burger and pizza restaurant.

Asked about effects the tax evasion charges may have on Mr. Deutsch's restaurant business, Mr. Picone said he was "not aware of there being any impact at this time."

Peninsula Foodist blogger Elena Kadvany contributed to this story.

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