Portland Strip Club Operators Sentenced to Prison for Tax Fraud

PORTLAND, Ore. – On Tuesday, October 25, 2016, U.S. District Robert E. Jones sentenced David G. Kiraz to 3 years in federal prison and 3 years’ supervised release, George D. Kiraz to 3 years in federal prison and 3 years’ supervised release, and Daniel G. Kiraz to 12 months and one day in federal prison after their trial conviction in May 2016.

All three men were convicted for conspiring to defraud the Internal Revenue Service (IRS). Additionally, David Kiraz was convicted for filing false income tax returns, and George and Daniel Kiraz for aiding and assisting the filing of a false income tax return. Judge Jones also ordered the defendants to pay restitution of $511,754 to the IRS and $137,654 to the Oregon Department of Revenue.

The defendants operated Cabaret Lounge, a strip club located at 503 W Burnside Street in Portland and Cabaret Lounge II, a strip club located at 17544 SE Stark Street in Gresham. From 2007 through 2010 these clubs collected over $1,500,000 in cover charges and dancer stage fees, all in cash. To hide this money from the IRS, the defendants maintained two sets of books, one set that accurately accounted for all cover charges and dancer fees, and another that did not.

For each year alleged in the indictment, the defendants reported their business activity on the individual income tax return of defendant David Kiraz using a Schedule C, “Profit or Loss from Business.” The defendants knowingly provided their tax return preparers only a two-page summary from the false set of books rather than providing the accurate financial information. This resulted in David Kiraz intentionally underreporting $1,501,874 in taxable income, and causing a federal tax loss of $511,754 and a state tax loss of $137,654 for tax years 2007 through 2010.

“These sentences are significant sanctions for serious crimes,” said Billy J. Williams, United States Attorney for the District of Oregon. “Business owners who deal extensively in cash have the same legal obligation to pay their fair share of taxes as does everyone else. The U.S. Attorney’s Office and IRS,” continued Williams, “will continue to work together to identify and prosecute those who cheat the tax system.”

“Skimming cash and keeping two sets of books cheats not only the United States, but also honest taxpayers that play by the rules and pay their fair share of taxes,” said Principal Deputy Assistant Attorney General Ciraolo. “The Department and the IRS will continue to make the investigation and prosecution of tax evaders like David, George and Daniel Kiraz, a top priority.”

“Our nation’s tax system funds many government services to include our military, infrastructure, and other vital services, so essentially, the Kiraz’s weren’t just cheating the IRS, they were cheating the men and women of our armed forces, anyone who drives our highways, and those who rely on any number of social services for their wellbeing,” said Special Agent in Charge Darrell Waldon of IRS Criminal Investigation. “Moreover, besides depriving the U.S. Treasury, tax scoffs shift their tax burden to every taxpayer who pays an honest tax, essentially robbing each and every one of us.”

This case was investigated by IRS Criminal Investigations. It was prosecuted by Quinn P. Harrington and Seth D. Uram, Assistant United States Attorneys for the District of Oregon, and by Department of Justice Tax Division Trial Attorney Leslie A. Goemaat.