WASHINGTON -- Nicholas J. Faranso of Farmington Hills, Mich., was sentenced today by U.S. District Court Judge John Corbett O’Meara in the Eastern District of Michigan to one year and one day in prison for conspiring to defraud the United States, the Department of Justice and the Internal Revenue Service (IRS) announced. Faranso pleaded guilty on Jan. 12, 2011.
According to court documents, Faranso was the owner of two strip clubs: BT’s in Dearborn, Mich., and Tycoon’s in Detroit. From 2001 through 2004, both establishments used a computerized point of sales system which produced guest checks and electronically tracked and recorded sales. Court documents reveal that, in 2001, Faranso purchased a computer software program called Journal Sales Remover from Theodore Kramer, a self-employed computer software salesman. This computer software program was specifically designed to remove a portion of the actual sales from the computerized point of sales systems. The program would make it appear that Faranso’s clubs received less income than they actually did.
Faranso directed Kramer to put the Journal Sales Remover program onto his businesses’ computer systems in order to help Faranso cheat on the businesses’ taxes. From about 2001 to about 2004, at Faranso’s request, Kramer made periodic visits to Faranso’s clubs to run the Journal Sales Remover program to remove a substantial amount of the actual sales from the computerized sales systems. Faranso then provided the reduced sales figures to his accountant. As a result, Faranso falsified the clubs’ tax returns by understating their gross receipts by more than $500,000. Kramer previously pleaded guilty to one count of conspiracy on Nov. 17, 2010.
In addition to the prison term, Faranso was sentenced to two years of supervised release and ordered to pay $6,000 in restitution.
Barbara L. McQuade, U.S. Attorney for the Eastern District of Michigan, and John A. DiCicco, Principal Deputy Assistant Attorney General for the Justice Department’s Tax Division, commended the IRS Special Agents who investigated this case and Tax Division Trial Attorneys Kenneth C. Vert and Tiwana L. Wright, who prosecuted the case.
More information about the Tax Division and its enforcement efforts can be found at www.justice.gov/tax .