Strip Club Operators Charged with Conspiring to Promote Prostitution and to Defraud the IRS
PORTLAND, Ore. – Today a federal grand jury returned a superseding indictment charging Lawrence George Owen, 73, of La Paz, Mexico, and Gary Bryant, 67, of Estacada, Oregon, with conspiring to defraud the IRS of more than $1.5 million in unpaid income and payroll taxes stemming from the operation of strip clubs and other adult-oriented businesses in the Portland metropolitan area between January 2006 and June 2010. The grand jury also charged Owen with conspiring to use facilities of interstate commerce to promote illegal acts of prostitution at the businesses throughout that period. The U.S. Attorney also filed a criminal Information charging Kandace Desmarais, 63, and Gilbert “Mace” Desmarais, 50, both of Milwaukie, Oregon, with participating in both conspiracies.
The superseding indictment and information allege that, by January 2006, Lawrence Owen and Gary Bryant, along with Kandace Desmarais and Gilbert Desmarais (two of Owen’s stepchildren) managed eleven adult-oriented businesses. The businesses, which accepted cash only, included eight strip clubs (the Landing Strip, Dillinger’s Pub, the Oh! Zone, Sugar Shack, Sugar Shack Too, Peek-a-Boos, Tommy’s, and Tommy’s Too), two stores offering pornographic videos and sex toys (Video Visions and Video Visions Plus), and a restaurant featuring Oregon Lottery games (Pelican Bay).
The strip clubs featured totally nude female dancers who paid the management “stage fees” of $15 for every shift they worked. In addition, most of the strip clubs either had enclosed rooms for “private shows” with the dancers or were adjacent to affiliated businesses with such rooms. Customers could arrange for 30-minute “private shows” with the dancers by paying $60 to the house and at least $100—often several times that amount—to the dancers. In fact, the “private shows” frequently involved illegal acts of prostitution paid for with cash from the conspirators’ ATMs.
The grand jury and U.S. Attorney alleged that the conspirators concealed more than five million dollars in receipts from the IRS—and fraudulently avoided $1.5 million in income taxes—between January 2006 and June 2010, largely by failing to report income from dancers’ “stage fees” and the payments for “private shows.” The businesses also failed to pay payroll taxes for numerous employees who were paid only in cash without any record of employment or wages.
The charges culminate an investigation by the Internal Revenue Service Criminal Investigation (IRS-CI) spanning more than five years. In June 2010, IRS-CI agents executed search warrants at all of the businesses and the homes of many of the conspirators. The agents seized more than $800,000 in cash and records of more than 35,000 “private shows” at the businesses over the course of the charged conspiracy.
Each charge carries a maximum sentence of five years in prison. If convicted, defendants Lawrence Owen, Kandace Desmarais, and Gilbert Desmarais face a maximum of ten years in prison, and Gary Bryant faces a maximum of five years in prison.
An indictment is only an accusation of a crime, and a defendant should be presumed innocent unless and until proven guilty.
The Portland Police Bureau assisted IRS-CI with this investigation. Assistant U. S. Attorneys Seth D. Uram and Ryan W. Bounds are prosecuting the case.