Taxable Talk

I’ve reported several times about strip club owners evading taxes (and getting caught). I guess there are a lot of temptations out there…and if you’re going to offer one, you get to thinking about another.

In any case, yet another ex-strip club owner has been convicted of tax evasion. From Jackson, Mississippi comes the story of Jon Adams. Adams used to own the Stardust Cabaret. Back in 1999 Adams attempted to get the zoning changed for his club. And the (then) Jackson City Council President, Louis Armstrong, found his way to prison for accepting a $25,000 bribe.

Adams’ troubles related to understating his income on his tax returns. The government alleged that Adams earned over $500,000 in 1999 and $466,000 in 2000 but that he reported $344,000 less. Oops. And allegedly making a $75,000 down-payment on some property while in bankruptcy didn’t sit well with the jury either.

While Adams faces six years at ClubFed and a maximum of $200,000 in fines, his stay will likely be significantly less. His sentencing is scheduled for October 9th.

There’s something about strip clubs that brings out the worst in taxpayers. They’re a mecca for tax fraud. In January I brought you the story of Dangerous Curves, a Philadelphia area strip club whose owners were accused of tax fraud. Today comes word that one of the owners, Bishop Krabsz, will plead guilty tomorrow to hiding $800,000 of income and paying employees under the table.

The investigation began as an offshoot of a corruption probe of former Philadelphia Councilman Richard Mariano. Also accused are Dangerous Curves’ accountant, Enrico Nardini, and the other co-owner, Kevin Rankin. Both Nardini and Rankin have pleaded not guilty.

Pity the poor madam escort service operator accused of being a madam. She has but one tangible asset, or so she says, a phone list of her well-to-do clients in Washington, DC. Why not sell the list to finance her defense?

The government, which alleges that Deborah Palfrey is really a madam, and accuses her of money laundering and racketeering (RICO), says that could damage their case. No sale, said Judge Gladys Kessler in Washington. And further, you can’t start lawsuits against potential witnesses. Ms. Palfrey had filed one suit against one of her “escorts,” and sued 15 other unnamed escorts. That lawsuit has been effectively stopped.

Meanwhile, Ms. Palfrey still plans to have an unnamed media group look at the 46 pounds of phone records (10,000 pages). Thankfully, it’s not me. I’m seeing too many numbers in my day job as is.

The next hearing on the case is set for April 12th.

News Story: San Francisco Chronicle

Erle Stanley Gardner would enjoy this plot. A madam, excuse me, an escort service operator, is accused of racketeering and money laundering. She has a list of her customers that she wants to sell. She claims to have given a copy of her list to an unnamed news organization, to help her case (according to her attorney).

Meanwhile the prosecution accuses the escort service operator to really be a madam, and they accuse her and her attorney of intimidating witnesses by suing former employees and customers. They’ve asked the judge to prevent her from instigating any of these lawsuits. On Monday the judge delayed until Thursday the hearing on whether Deborah Palfrey, the accused, can sell her list.

So is Palfrey a madam who ran a high-class prostitution business serving wheelers and dealers in the District of Columbia, or just an innocent businesswoman who operated, as she told the Washington Times, “[a] legal, high-end erotic-fantasy service [with clients] from the more refined walks of life” in Washington?

News Story: Washington Times

Two months ago I wrote about the owner of Club Vogue (a strip club) in Columbia, Missouri. James Andrew Yaeger, the owner, paid his lap dancers in cash, and didn’t report the income. He got caught, and is looking at a term at ClubFed. Yesterday, the General Manager of Club Vogue admitted his part in the scheme.

Dan Marcum earned about $82,000 from Club Vogue in 1999, but didn’t file a tax return according to this story. The US Attorney noted he didn’t file in 2000 and 2001 either. If you’re paid in cash, it’s just as much income as if you’re paid by a check. Although Marcum faces up to $250,000 in fines and five years in prison, he’ll likely receive a short prison term at ClubFed.

I wish I knew the answer—I could write a book on it! Perhaps it’s the cash income. Maybe it’s the borderline pornography. In any case, yet another strip club owner had his day in court.

James Andrew Yaeger, of Columbia, Missouri, owned two strip clubs: “Club Vogue” and “Show Girls.” Today he pleaded guilty to underreporting his income from 1999 through 2001 from his clubs.

How did this cheating occur? Well, when the dancers were paid for their lap dances (in cash, of course), the cash was stuffed in envelopes behind the bar. Unfortunately for Mr. Yeager, someone tipped off state and federal authorities, and Mr. Yeager’s clubs were raided.

It’s unclear from this article whether or not Mr. Yeager faces further court proceedings. But Mr. Yeager is looking at up to 15 years in ClubFed, a fine of up to $750,000, and will likely have to make restitution. And I’m sure the Missouri state authorities are just waiting for their turn.

I’m gone for ten days on vacation and return to find that the new news is like an instant replay of the old news. Yet another adult bookstore owner has been indicted on income tax evasion charges.

Jerry Pendergrass owned Metro News, the self described World’s Largest Adult Bookstore, and several other adult entertainment entities in Tennessee. Pendergrass allegedly purchased property but didn’t record the deed. Then, using the help of two attorneys who have also been indicted, Pendergrass was allegedly able to hide over $300,000 in proceeds from the sale of the property. Pendergrass also allegedly had about $400,000 in phony deductions and had personal expenses paid for by his corporation and not reported as income on his tax returns.

This isn’t the first time Pendergrass has been in trouble. Federal tax liens totaling over $565,000 have been filed against him. Pendergrass was convicted in the late 1990s on an obscenity charge, but the conviction was overturned.

News Story: The Chattanoogan

It appears that owning a strip club is an occupation more likely to lead to tax evasion; today’s story is definitely not the first time we’ve seen this charge. In any case, Timothy Ray Cline of Justice, WV (the name of the town is somehow fitting) is charged with failing to pay $84,000 in taxes from his “Adult Entertainment Clubs” in West Virginia. Cline is also alleged to have inappropriately gotten $35,000 in disability benefits.

News Story Here