PORTLAND — Three family members who ran a pair of Portland-area strip clubs were sentenced to federal prison Tuesday for conspiring to defraud the IRS.
David G. Kiraz, his father George D. Kiraz, and David’s brother, Daniel G. Kiraz, cheated the government by concealing $1.5 million in income and evading $500,000 in income taxes over four years, prosecutors argued during their May trial.
David Kiraz was also convicted for filing false tax returns, and his brother and father were convicted for aiding and assisting the filing of a false income tax return, Kevin Sonoff, a U.S. Attorney’s Office spokesman, said in a news release.
Their strip clubs, Cabaret Lounge on West Burnside Street and Cabaret Lounge II in Gresham, collected more than $1.5 million in cover charges and dancer stage fees from 2007 through 2010.
The family members kept two sets of books, one that included the fees and one that didn’t, and they submitted the incorrect information to their tax return preparers, Sonoff said.
That caused a federal tax loss of almost $512,000 and state loss of more than $137,500 for tax years 2007 through 2010, Sonoff said.
David Kiraz and his father were each sentenced to three years in federal prison and three years of supervised release; Daniel Kiraz was sentenced to a year and one day in federal prison. U.S. District Judge Robert E. Jones ordered the trio to pay restitution totaling $511,754 to the IRS and $137,654 to the Oregon Department of Revenue, Sonoff said.
The scheme was discovered when an undercover IRS agent posed in August 2010 as an interested buyer after the Kirazes put their strip clubs up for sale, according to prosecutors. Out-of-town IRS special agent Robert Macy covertly videotaped a meeting he had with George Kiraz and two real estate agents to discuss buying the clubs.
At that meeting, the senior Kiraz quoted a high sales price, relying on the spreadsheet that accurately depicted the two clubs’ income, citing combined gross receipts for 2008 of $2.4 million. The agent quickly discovered that those didn’t match the $1.97 million in revenues that David Kiraz, the owner of the clubs, had reported on his income tax return that year, Assistant U.S. Attorney Seth Uram previously argued.
Search warrants were issued for the clubs and David and Marci Kiraz’s home. Agents seized 85 boxes of paper records, plus digital files on 11 business and personal computers and interviewed former club employees.
A jury acquitted Marci Kiraz.
“These sentences are significant sanctions for serious crimes,” Oregon’s U.S. Attorney Billy Williams said in a statement. “Business owners who deal extensively in cash have the same legal obligation to pay their fair share of taxes as does everyone else.”
The IRS Criminal Investigation Division investigated the case, Sonoff said.
