Four Portland-Area Strip Club Operators Charged in $500,000 Tax Cheating Conspiracy

PORTLAND, Ore. - Billy J. Williams, Acting U.S. Attorney for the District of Oregon, today announced that a federal grand jury sitting in Portland returned an indictment charging defendants:

• David G. Kiraz, of Happy Valley, Oregon,
• Marci K. Kiraz, wife of David Kiraz and a resident of Happy Valley, Oregon,
• Daniel G. Kiraz, brother of David Kiraz and a resident of Portland, Oregon, and
• George D. Kiraz, father of David Kiraz and Daniel Kiraz and a resident of Estacada and Portland, Oregon

with engaging in a scheme to file false federal income tax returns that underreported $1,501,874 in cash from their operation of two Portland-area strip clubs and to cheat the IRS out of $519,503 in income taxes.  The indictment identifies David Kiraz as the owner and operator of the strip clubs, Daniel Kiraz and George Kiraz as managers of the strip clubs, and Marci Kiraz as a bookkeeper for the strip clubs.

The indictment alleges that 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 mid-2011, the strip clubs collected cash through cover charges from customers and stage fees from dancers, all of which were recorded in daily records at the businesses, however, the defendants allegedly had these records destroyed.

The defendants allegedly maintained two sets of books -- one set that did not record the cover charge cash and dancer stage-fee cash and one set that did. The first set of books was a profit and loss spreadsheet kept on the businesses’ computers on which the cover charges and dancer stage-fees were not recorded.The second set of books was a profit and loss spreadsheet kept on defendant David Kiraz’s personal computer at his home on which the defendants accurately recorded the cash made through cover charges and dancer stage-fees.

The indictment further alleges that each year the defendants reported the business activity of the strip clubs on the individual income tax return of defendant David Kiraz using a Schedule C, “Profit or Loss From Business”.The defendants gave their tax return preparers false records, intentionally causing the return preparers to create tax returns for defendant David Kiraz that did not report most of the cash obtained through cover charges and dancer stage fees.This resulted in underreporting of taxable income totaling $1,501,874 and a tax loss of $519,503 for tax years 2007 through 2010.

“Adult entertainment businesses deal primarily in cash, and that makes it much easier for some owners of these businesses to cheat on their taxes,” stated Acting U.S. Attorney Billy Williams.  “This office, in partnership with the IRS, will vigorously investigate and prosecute business owners who do not abide by the tax laws or pay their fair share of income taxes.”

This case was investigated by the Criminal Investigation Division of the Internal Revenue Service.  The case is being handled by Assistant U. S. Attorney Seth D. Uram.

Additional details can be found in the attached indictment, here.  Kiraz Indictment