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Justice News

Department of Justice
U.S. Attorney’s Office
District of Oregon

Thursday, May 26, 2016

Portland Area Strip Club Operators Found Guilty of Conspiring to Defraud the IRS

Defendants Maintained Two Sets of Books to Hide $1.5 Million and Evade $500,000 in Income Taxes

PORTLAND, Or - A federal jury sitting in Portland, Oregon, after a six-day trial, found three family members who ran two strip clubs in the Portland area – Cabaret Lounge I at 503 W Burnside Street and Cabaret Lounge II at 17544 SE Stark Street – guilty of conspiracy to defraud the IRS and charges relating to filing false tax returns.

From 2007 through mid-2011, the defendants’ strip clubs collected more than $1.5 million in cash door charges and dancer stage fees. The defendants maintained a set of books at the Cabaret clubs that did not include the $1.5 million in stage fees and door fees and kept a second set of books, which tracked all of the cash receipts, including the stage and door fees, at the home of David and Marci Kiraz. 

IRS Special Agents executed search warrants at the strip clubs and at the residence of David and Marci Kiraz, and seized 85 banker boxes of records and all the files on 11 computers. IRS Special Agents then spent over 600 hours reviewing these records, located the second set of books, and proved David Kiraz filed false tax returns.

David Kiraz reported the business activity of the strip clubs each year on his individual income tax returns. The defendants gave their tax return preparers the false books maintained at the strip clubs, intentionally causing the return preparers to create tax returns for David Kiraz that did not report between $330,000 and $460,000 in door fees and stage fees each year.  In this way, the defendants evaded $500,000 in income taxes for tax years 2007 through 2010.

The jury convicted David G. Kiraz, 34, of Happy Valley, his father George D. Kiraz, 56, of Portland, and David’s brother Daniel Kiraz, 31, of Portland, of conspiring to defraud the IRS by filing false federal income tax returns for David Kiraz. The jury also found David Kiraz guilty of three counts of filing false tax returns, George Kiraz guilty of three counts of aiding and assisting in the preparation and filing of false tax returns, and Daniel Kiraz guilty of one count of aiding and assisting in the preparation and filing of a false tax return. The jury acquitted Marci Kiraz, wife of David Kiraz.

Sentencing is scheduled August 30, 2016, before Senior U.S. District Court Judge Robert E. Jones for the District of Oregon in Portland.  Each defendant faces a statutory maximum sentence of five years in prison on the charge of conspiracy to defraud the IRS and three years in prison on the charges of filing false tax returns and aiding and assisting in the preparation and filing of false tax returns.  They also face a maximum term of three years of supervised release and a maximum fine of $250,000 on each count.

"Every business is required to pay its fair share of taxes," said U.S. Attorney Billy J. Williams.  “This office, in partnership with the IRS, will vigorously investigate and prosecute business owners who take advantage of the cash-intensive nature of their businesses to conceal income from the IRS and cheat on their taxes.”

This case was investigated by special agents with IRS-Criminal Investigation in Portland, Oregon and prosecuted by Trial Attorney Leslie A. Goemaat of the Justice Department’s Tax Division and Assistant U.S. Attorneys Seth D. Uram and Quinn P. Harrington for the District of Oregon.

Financial Fraud
Updated May 26, 2016