Attorney's office: Man, former ODOE employee had secret business relationship; made over $1M

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Three men who operated two strip clubs have been sentenced to prison for tax fraud.

David Kiraz, George Kiraz and Daniel Kiraz were convicted of conspiring to defraud the Internal Revenue Service in May. They were sentenced in federal court Tuesday.

The men operated Cabaret Lounge on the 500 block of West Burnside Street and Cabaret Lounge II on the 17500 block of Southeast Stark Street in Gresham.

According to court documents, David Kiraz owned the businesses. Daniel Kiraz is his brother and George Kiraz is their father.

Investigators said the clubs collected more than $1.5 million in cover charges and dancer stage fees from 2007 through 2011.

To hide the money from the IRS, they maintained two sets of books. One accurately accounted for the money and the other did not, according to the Department of Justice.

The men then reported their business activity on the individual tax return of David Kiraz, using a Schedule C "Profit or Loss from Business."

Investigators said they knowingly provided their tax preparers only a two-page summary from the false set of books.

The result was David Kiraz intentionally underreporting more than $1.5 million in taxable income and causing a federal tax loss of $511,754 and a state tax loss of $137,654 for tax years 2007-2010.

David Kiraz was also convicted on the charge of filing false income tax returns, while George and Daniel Kiraz were convicted of aiding and assisting in the filing of false income tax returns.

David and George Kiraz were sentenced to three years in prison. Daniel Kiraz was sentenced to one year in prison.

They were also ordered to pay $511,754 restitution to the IRS and $137,654 to the Oregon Department of Revenue.

"These sentences are significant sanctions for serious crimes," said Billy J. Williams, United States Attorney for the District of Oregon. "Business owners who deal extensively in cash have the same legal obligation to pay their fair share of taxes as does everyone else."

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