STEW LEONARD SR. LEAVES PRISON

GREG GATTUSO

WESTPORT, Conn. -- Stew Leonard Sr., the founder of two celebrated Connecticut dairy stores, was released from a federal prison last week after serving 44 months of a 52-month sentence for tax fraud.

Leonard, 67, was scheduled to be released from the Schuylkill Federal Correctional Institute in Minersville, Pa., Oct. 21. However, a federal statute allows prisoners who have served most of their sentences to spend the rest of their sentences in a halfway house or home confinement.

According to a family spokesman, Leonard is assigned to home confinement, and he will be allowed to work. However, the spokesman did not know Leonard's work plans, or what role, if any, he will play in the company. Leonard could not be reached for comment. However, he issued a brief statement that said, "Mistakes were made. A price had to be paid for those mistakes and I paid it."

Federal prosecutors said Leonard and a group of collaborators used a sophisticated computer system to skim $17.1 million off the books at his Norwalk, Conn., store between 1981 and 1991, in an effort to avoid paying $6.7 million in federal taxes.

In a July 1993 plea bargain, Leonard pleaded guilty to one count of income tax fraud and was ordered to pay $15 million in taxes and penalties and a $650,000 fine. In October 1993, he began serving a 52-month prison sentence.

Leonard's brother-in-law, a former store executive, was sentenced to 41 months in prison and ordered to pay $152,000 in fines. One employee was sentenced to 18 months in prison while another was sentenced to two years' probation for their roles in the scheme.

Tax problems have also haunted Stew Sr.'s son, Tom Leonard. As previously reported in SN, Tom Leonard was indicted in April on a number of tax charges. In a five-count indictment handed down by a grand jury in U.S. District Court here, Tom Leonard, who lives in England, was accused of diverting gross receipts and understating total receipts for the Danbury store in 1992, 1993 and 1994, and underreporting his and his wife's income for 1992 and 1993. He has pleaded innocent.

The two Stew Leonard's stores, in Norwalk and Danbury, Conn., have become the stuff of retailing legend, with their world-famous customer service and attractions such as costumed employees, a petting zoo and singing robots.

Stew Leonard Jr., who has been running the Norwalk store since his father went to prison, was said to be mulling a third store on a 50-acre plot he owns in Orange, Conn. But that plan has met with opposition from local residents who fear the new store would create too much traffic. He is now seeking approval to level the parcel in order to start a vegetable farm. The family is said to be looking at West Haven, Conn., or Westchester County, N.Y., as potential sites for a new store.