By J. PATRICK PEPPER
Times-Herald Newspapers
DETROIT — A recently unsealed federal grand jury indictment charges the owner of a Dearborn strip club with a host of offenses stemming from a sophisticated tax evasion scheme.
Nicholas Faranso of Farmington Hills appeared in U.S. District Court for the Eastern District of Michigan for arraignment April 9 on charges of conspiracy to defraud the Internal Revenue Service and three counts of filing a false tax return.
Faranso is the owner of BT’s Executive Club, 14417 Michigan Ave., as well as Tycoon’s strip club in Detroit.
Prosecutors allege that over the course of four years, from 2001 to 2004, Faranso used sophisticated computer software on the point-of-sale terminals at BT’s and Tycoon’s that was designed specifically to mask actual sales numbers so he would have less income to report. Also being alleged is that Faranso frequently took cash payments from dancers he required as a condition of working at the clubs.
The complaint also alleges that computer programmer Theodore Kramer was directly involved in the scam, making frequent trips to both Faranso businesses in order to both install and manage the program. The purpose for Kramer’s visits, prosecutors said, was to run the software in order to reduce the amount of cash receipts to an amount that would closely approximate what the businesses were depositing in the bank.
Kramer is charged with one count of conspiracy to defraud the IRS, which carries a maximum penalty of five years’ imprisonment and a $250,000 fine.
Faranso also faces charges that he filed grossly underreported individual and corporate tax returns in 2003. The total difference in what Faranso reported and what authorities allege he actually collected through the two businesses and his own individual income totals more than $1.1 million.
According to the complaint, in 2003 Dearborn Avenue Bistro Inc., the corporate parent of BT’s, took in income in excess of $1.4 million but reported only $1.2 million. The complaint also said that Faranso claimed taking home personal income from BT’s of $7,511, when in reality that sum exceeded $200,000.
For his higher-grossing Tycoon’s property, Faranso allegedly collected personal income of about $406,000 but reported about $32,000. Corporate income for that year for Celebrity Reservations Inc., Tycoon’s corporate name, was in excess of $1,750,000, but was only reported at $1,410,000.
Filing a false tax return, under penalty of perjury, carries a maximum penalty of three yearns imprisonment and a fine of $250,000, per count.
“The law is crystal clear,” said Maurice Aouate, special agent in charge of the IRS Criminal Investigation Division. “People must file accurate returns and pay their taxes.
“IRS Criminal Investigation will vigorously investigate those individuals who knowingly and willfully evade their tax obligations.”