Duluth souvenir shop owner sentenced to prison, ordered to pay $620K for evading taxes

The operator of four Duluth souvenir shops has been sentenced to prison and ordered to pay more than $620,000 in restitution for evading taxes by hiding revenue and income from the IRS for several years.

Shimon Shaked, 57, was sentenced Monday in U.S. District Court to one year and one day in prison after pleading guilty to tax evasion while running his I L ove Duluth, I Love Duluth 2, Up North-The Good Life and the Lake Life in the Canal Park tourist district.

While operating and controlling the stores under a holding company that he formed in 2012, Shaked listed his teenage daughter as the nominal owner in order to dodge taxes on income he received, prosecutors alleged.

In 2017, Shaked opened I Love Marquette, another souvenir store in Marquette, Mich., and another souvenir store in Frankenmuth, Mich.

According to the guilty plea, Shaked reported the credit card sales for his stores, but failed to report or pay taxes on most cash sales. He used the cash from the unreported sales for his personal benefit — including to pay child support and fund an attempt to open an alligator farm in Florida — and to pay some of his employees for their overtime hours.

Shaked's sentence was below the 2 and 2 ¹⁄₂ years in prison that federal guidelines recommended.

Prior to sentencing, defense attorney Marsh Halberg argued for three years' probation for his client, followed by three years of supervised release. He pointed out that in Shaked's native Israel, it's common for people to keep large amounts of cash at home and not in banks.

In an interview Wednesday, Halberg said that Shaked's time in prison means that "keeping these businesses afloat will be a challenge" for his client's family as the busy summer season draws near.

Halberg said he submitted to the court dozens of letters of support for Shaked ahead of sentencing, including one from his client's rabbi, Menachem Ross.

The rabbi wrote that Shaked is part of a group that is "currently working on assisting over 1,000 refugees fleeing their war-torn homes" in Ukraine. Shaked's wife, Maryna Kurkina, is from Ukraine, Halberg said.

"Shimon truly is a kind and generous person," the attorney said. "I think the judge recognized the good he does in the world when balancing the correct sentence to impose."

The prosecution, in its pre-sentence filing with the court, noted that Shaked "chose to cheat on his taxes out of greed, not desperation. Indeed, nothing in Shaked's background explains or excuses his crimes."

Shaked came to the United States from Israel as a young adult, and "for 20 years he has built and run several successful businesses in the United States," the prosecution filing continued. "His should be the story of the American dream."