Jersey Joe’s Tax Woes: ‘The federal govt. is wrong,’ councilman says

By John Earl
Surf City Voice

Joe Carchio sounded bitter but said he doesn’t care if he gets reelected to the Huntington Beach City Council or not. “If people don’t want me to be a councilman, then fine; I don’t care, I don’t care, I really don’t care,” he recently told the Voice.

According to Carchio, his performance on the council has been second to none going back a century. “I have given more to this city than any other councilman that was ever here,” he declared unequivocally.

Carchio spat those sour grapes out near the end of a recent (Sept. 26) interview with the Voice, an interview that he had tried for a long time to avoid; before it was over, he had complained that this reporter was dishonest, untrustworthy, driven by a vendetta and no longer his friend.

He also issued a threat.

Tax lien
Carchio's $50,252.24 federal tax lien for upaid taxes in 1994 and 1995.

This reporter was attacking him and his family, Carchio alleged, because of my supposed ties to local community groups that opposed his past council votes in favor development on the upper Bolsa Chica mesa and in southeast Huntington Beach, and he wouldn’t put up with it.

“If you’re going to start a war, you’re going to start a war,” he warned. “You’re going to start a 9-11 with me, John.”

Under pressure from a Voice investigation of his past business practices and misuse of public employee benefits, Carchio had confessed that he is not married and had kept his ex-wife enrolled on his city paid health care plan even though she was no longer eligible—the latter being an “honest honest mistake,” he said.

That mistake had cost the City’s taxpayers $2,782.73 for 19 months of care. The overpayment ended when Carchio cut his ex-wife from his health plan (except for vision coverage which came without extra premiums) last March; but, as reported exclusively by the Voice, he didn’t pay back the money until six months later—three days after the Voice inquired about his divorce status.

Carchio promised to make a tell-all statement to the OC Register the next day (Sept 27) explaining what happened. “I’m going to the Register tomorrow…I got the whole thing laid out. I’m going to tell them. I didn’t do anything wrong.”

Then, showing a bit of remorse, Carchio said he would take the heat for what he did and hinted that a public apology would be forthcoming.  “In a statement that I’m going to put out, I will take the heat. I am so sorry,” he said.

Eleven days later the Register hasn’t published anything about the topic and there are no signs of a public apology or statement of any kind. In fact, there was no sign of Carchio himself at a candidates’ forum on Monday, Oct. 4, and it was rumored that he wouldn’t be attending the debate to be held this Thursday (10/7/10) at the Huntington Beach Central Library.

Tax Problems
But there is a lot to look in Carchio’s past other than his recent misuse of public benefits for his ex-wife. In fact, Carchio has a remarkable history of failing to pay his county, state and federal taxes until forced to do so—often many years later.

The tip of Carchio’s tax troubles was exposed in a 2007 OC Weekly article shortly after he was elected to the council and sworn into office. The article noted the “many tax liens against him [Carchio] over the years” and quoted unaware Orange County GOP leader Scott Baugh’s reaction that, “just having one [tax lien] against you doesn’t automatically mean you did anything wrong. A lot of people get screwed by the government.”

But records on file with Orange County’s Clerk-Recorder’s office reveal that at that time Carchio had accumulated 19 tax liens against him totaling over $245,000 scattered across time all the way back to 1982, although the records also show that his biggest tax troubles began after he got married to Valerie Watcher in 1995.

Valerie Carchio's accusation of fraud
Valerie Carchio accuses husband Joe Carchio of fraud in divorce proceedings.

As of a few weeks ago, Carchio’s overall lien total was 26 or $270,972.40 in tax debts. Twelve of those liens remain unpaid for a total of $83,075.35 in outstanding debt, including: two county property tax liens, one for 2009 and the other for 1998, totaling $3,187.02; one state lien of $1,643.58 for 2008 taxes; and two federal liens, one for $5,125.23 for 2005 and the other for $50,252.24 going back to 1994 and 1995.

So who is getting screwed, Carchio or the taxpayers? Despite the most recently available records on file at the County-Clerk’s office, Carchio claims that he is debt free. “Everything is cleared out, I don’t owe anybody,” he said.

As for the $50,252.24 still owed the IRS according to County records, Carchio claims that his lawyer is currently sorting that out. “We filed the tax…He filed those forms. The federal government said they didn’t get them…”

Carchio offered to show the forms. “The federal government is in the wrong,” he declared.

But the official record is much less ambiguous than Carchio’s version of his tax history. It shows that from the time he married Valerie in 1995 until she won an uncontested divorce from him in August of 2008, and since their divorce, Carchio had a pattern of tax delinquency while his wife/ex-wife had a record of financial stability.

The fact that Carchio relied upon his wife’s good credit to keep him afloat financially is evident through a 1998 Interspousal Transfer Deed in which he gave title to his Huntington Beach home to her, a tactic that makes refinancing easier when one spouse has bad credit.

In 2002 there were ten outstanding tax liens levied against Carchio totaling almost $114,000, based on calculations made from figures provided by public documents.

That record contrasts sharply with the business owner image that many council candidates, including Carchio, like to convey to the voters during election time. In Carchio’s current reelection campaign brochure, for example, a quote attributed to “Valerie Carchio”—an obvious attempt to fool voters into thinking that he is married—notes that she has watched Joe “start two businesses and grow at every turn of his life.”

Jersey Joe’s Mystery
But in divorce court just three years ago (2007), Valerie Carchio—who now refers to herself as Valerie Watcher-Carchio on her Facebook account—accused her husband of fraudulently selling Jersey Joe’s Italian Eatery, the councilman’s famous namesake and supposed self-owned business.

Watcher claimed that Jersey Joe’s was hers. But Carchio had formed a corporate partnership with Seacliff resident Steve Kelman (JC & SK Inc.) and was in the middle of selling it for $161,500 when she asked the divorce court to set aside the proceeds for her as part of her settlement. The court granted her request on Aug. 29, 2008 without a peep of protest from Carchio.

In her own words, here’s the story that Valerie Carchio gave to the court and that husband Joe did not challenge:

I purchased a business now known as “Jersey Joe’s Italian Restaurant” on March 5, 2002. The business was sold to me alone in the name of “Jersey Joe’s Downtown Italian Deli”. Somehow, Respondent [then husband Joe Carchio] managed to form a corporation and fraudulently place the business into same. To my knowledge, my name is not on the corporation. Respondent and I ran the business together, but after a few years, Respondent has been largely responsible for the day to day operations of the business. The business is now being sold, and I am owned monies that have been given to Respondent toward the business. If the court does not freeze this money, it will be spent, and I will be unable to collect any monies that the court determines are owned to me. Therefore, I am seeking an order that escrow place any and all proceeds into my attorney’s trust account, pending a resolution of this issue. The escrow company is DISCOVER ESCROW, and they are located in Huntington Beach, CA. The monies placed into the business were by way of a second on my home. I am asking that Respondent pay one half the payment, until such time as this issue is resolved.

On Sept. 19 Carchio told the Voice that he, not his wife at the time, had owned Jersey Joe’s. “It was my restaurant because…it was part of the corporation [JC &SK Inc.] and I was part of the corporation.” He acknowledged that it was sold but that his wife got the money.

On Sept. 26 Carchio told the Voice that his wife was originally the sole owner, “and then we (presumably Carchio and Kelman) formed a corporation.” As for Watcher’s allegation that Jersey Joe’s was her business and that he was fraudulently selling it, “Not true,” he said.

If it was his restaurant (and he stood to lose $160,500, minus obligations), why didn’t he bother to contest her assertion that he was a thief?

“I don’t contest anything,” Carchio explained. “We’re not enemies. We still live together.”

Joe Carchio prepares to sell Jersey Joe's.
Joe Carchio prepares to sell Jersey Joe's.

Carchio’s statement, which hints that he has lived with Watcher since their divorce (despite a settlement requirement that he leave her home Oct. 1, 2008), is consistent with Statement of Economic Interests (700) forms that he filed with the city in March 2008, March 2009 and in August of 2010 that listed the her residence as his mailing address.

Carchio elaborated on their current relationship.

“We live together and we date…We have family and everything. So I don’t care about that money,” he explained. “It doesn’t make any difference to me.”

Requests from the Voice to Carchio, his former corporate partner Stephen Kelman, and his ex-wife for documentation of ownership went unanswered. A public records search and efforts to contact the owners of Jersey Joe’s predecessor were also fruitless, so far.

However, Valerie’s divorce-court claims and other documents, as well as comments from Carchio about their relationship after their divorce, do provide clues that, if nothing else, raise serious questions related to how Carchio has handled his tax problems.

The available facts based on those sources offer a confusing and contradictory picture that is presented here in chronological order.

  • Feb. 26, 2002: Valerie Carchio took out a business license with the City of Huntington Beach for Jersey Joe’s Downtown Deli, located at 424 Olive St.
  • March 5, 2002: According to Valerie Carchio’s court statement, “The business was sold to me alone in the name of ‘Jersey Joe’s Downtown Deli.’”
  • March 8, 2002: Valerie Carchio registers a Fictitious Business Name Statement for Jersey Joe’s Downtown Deli, saying she has not started doing business yet.
  • Feb. 11, 2003: Joe Carchio registers Bella Luna II as a corporation with the Secretary of State. The address is 424 Olive St., same as for Jersey Joe’s (Carchio had been a partner with former HB mayor and convicted felon Dave Garofalo and others in Bella Luna, a previous failed restaurant venture located at 215 Main St.).
  • Nov. 5, 2003: Joe Carchio registers JC &SK as a corporation with the California Secretary of State.
  • Jan. 2, 2004: Joe Carchio files a Fictitious Business Name Statement (FBNS) for Jersey Joe’s Italian Eatery.
  • Jan. 30, 2004: JC & SK (Joe Carchio with Steve Kelman) publish their FBNS in a local newspaper.
  • Feb. 9, 2004: A city audit triggered by a new liquor license application with the California Department of Alcoholic Beverage Control (ABC) detects a new ownership for 424 Olive St.
  • April 2, 2004: A liquor license is issued by the ABC for JC & SK Inc., doing business as Jersey Joe’s Italian Eatery, with Joe Carchio listed as President. Liquor licenses must be displayed in public view on the wall of the establishment selling the liquor, showing the name of the presumed owner of the establishment.
  • Aug. 11, 2004: Joe Carchio files a Statement of Economic Interests (700) form with the City which states that he has less than 10 percent ownership in Jersey Joe’s Italian Eatery.
  • Aug. 24, 2004: A federal lien for $50,252.24 in back taxes (years 1994 and 95) is issued on Joe Carchio. Although there are exemptions, federal liens can be levied against all types of property, including personal property.
  • May 4, 2005: a lawsuit is filed against JC & SK (Jersey Joe’s) by a restaurant supplier, indicating that the plaintiff assumes ownership by Joe Carchio.
  • Oct. 11, 2005: A county lien of $206.16 is filed against JC & SK (Joe Carchio) for back property taxes on property at 424 Olive St., the location of Jersey Joe’s, indicating that the County Assessor is assuming that Joe Carchio owns Jersey Joe’s Italian Eatery.
  • 2005 700 form for Joe Carchio unavailable.
  • Aug. 2006: Joe Carchio, now on the City Council, files a 700 form that states he has 10 percent or greater interest in Jersey Joe’s Italian Eatery and that he is the corporation president.
  • Oct. 12, 2006: Another property tax lien for $249.07 is placed against JC & SK at 424 Olive St.
  • Sept. 4, 2007: Intention for a liquor license transfer and sale of Jersey Joe’s (JC & SK) to the current owners of Deville bar for $161,500.00 is publicly recorded.
  • Sept. 25, 2007: Valarie Carchio files for divorce and alleges that Joe Carchio is fraudulently selling her restaurant business, Jersey Joe’s Italian Eatery at 424 Olive St.
  • Aug. 29, 2008: The divorce of Joe Carchio by Valerie Carchio is finalized. Valerie is awarded the money from the sale of Jersey Joe’s, which comes to about $107,000.00 after fees and obligations.
  • The divorce settlement leaves Joe Carchio responsible for any debts made in his name or incurred by JC & SK Inc. since May, 2001, the month recognized as Joe and Valerie’s date of separation.
  • At some point the corporate status for JC & SK Inc. was suspended, most likely for failure to pay taxes, but the Voice awaits further documentation from the Secretary of State.
  • According to figures gathered from public documents currently available at the Clerk-Recorder’s Office of Orange County, Joe Carchio still has tax liens totaling over $80,000 levied against him.

What Happened?
In the absence of more precise documentation, it is impossible to know for sure who actually owned Jersey Joe’s Italian Eatery and when they owned it. And greater transparency by any of the principal actors involved in the complex saga of Carchio’s tax problems, especially Carchio himself, might help provide a clearer picture for Huntington Beach residents, who might otherwise wonder exactly who they are being asked to vote for again on Nov. 5.

But the available information seems to form a preponderance of evidence that his wife owned Jersey Joe’s Italian Eatery first and that he took over ownership later. If that is the case, and considering that Carchio did not challenge his wife’s assertion that the business was hers, the question also arises of whether a fraudulent conveyance—the transferring of property to hide it or keep it out of reach of creditors—took place or not.

Under the Uniform Fraudulent Transfer Act that question would be a civil matter and creditors would have recourse to recover their money accordingly. But under the California Penal Code, Section 154, known as the California Fraudulent Transfer Act, it would be a misdemeanor criminal matter with a potential solution of up to one year in county jail and a fine of up to $1,000 for anyone found guilty—if the value of the store equipment and goods transferred in the sale is over $250 the crime becomes a felony.

Carchio bristles at the mere suggestion that there was any shifting of property for the purpose hiding it from the tax collector. For him, the issue boils down to “three candidates who are running for city council” and this journalist trying to get him out of office. “If it makes you comfortable that you think I should lose the election then go ahead and do it, John. I don’t care. I don’t care.”

Predicting the final outcome of Carchio’s tax problems, like predicting the results of his attempt to serve a second term on the Huntington Beach City Council, are beyond the Voice’s reporting capabilities. But Carchio offered his own analysis of the future:

“You know, John, I’m a good guy. And you’re trying to make me look like a bad guy. So, you can do whatever you want. I know you’re going to do it the way you want to print because you think that that’s going to make you look good. You know what? It’s going to make you look bad because people like me—they don’t like you.”

Compared to a 9-11 attack, that’s okay.

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7 thoughts on “Jersey Joe’s Tax Woes: ‘The federal govt. is wrong,’ councilman says”

  1. Dave Garofolo owned the eatery w/Carchio, and his ‘9-11′ is probably the HBPD, who have long been his and dave’s henchman.

    The guy always scared me. I’ll never forget once, sitting in his eatery (I was the security guard for Plaza Almeria from 97-2000) a woman asked Candidate Carchio what he thought was the most important issue facing HB at the time and he answered, “pornography’!

  2. The good, clean, honest local government of Bell has come to Huntington Beach. Remember, I am Joe Carchio and am endorsed by the Republican Party of Orange County, the HB Police and the HB Fireman Associations. Thus, I can do no wrong and am absolved of all Original Sin.

    How dare you doubt the honesty, integrity as Joe Carchio wants to help City Hall get back to the basics. Just ask the Women for Joe Carchio as you can trust Joe Carchio. Do not confuse Joe Carchio with facts as I am Joe Carchio. My campaign literature sent in the US Mail states I am the “Owner of Jersey Joe’s Italian Restaurant in downtown Huntington Beach”.

    Milt Dardis
    Huntington Beach Ca

  3. Who is paying for Joe’s re-election campaign? I see a lot of signs out there, looks expensive. His re-election marketing doesn’t match up with his quote of not caring about being re-elected.

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