David G. Kiraz, George D. Kiraz, and Daniel G. Kiraz were sentenced to federal prison Tuesday, October 25, 2016, for a years-long scheme to defraud the IRS and the Oregon Department of Revenue, hiding more than $1.5 million in cash income from strip club operations. The trio ran Cabaret Lounge at 503 W Burnside Street in Portland and Cabaret Lounge II at 17544 SE Stark Street in Gresham, where they collected cover charges and dancer fees — all in cash — from 2007 through 2010.
U.S. District Judge Robert E. Jones handed down identical 3-year federal prison terms and 3 years’ supervised release to both David G. Kiraz and George D. Kiraz. Daniel G. Kiraz received 12 months and one day behind bars. All three were convicted in May 2016 following a trial. David Kiraz was found guilty of conspiring to defraud the IRS and filing false income tax returns. George and Daniel Kiraz were convicted of conspiracy and aiding in the filing of a false tax return.
The Kiraz brothers maintained two sets of books—one accurate, one falsified. They provided only the doctored records to their tax preparers, submitting a two-page summary from the false books with David Kiraz’s Schedule C filings. As a result, David Kiraz intentionally underreported $1,501,874 in taxable income across four years, triggering a federal tax loss of $511,754 and a state tax loss of $137,654.
Judge Jones ordered full restitution: $511,754 to the IRS and $137,654 to the Oregon Department of Revenue. Authorities emphasized that no loophole exists for cash-heavy businesses—obligations to the tax code are absolute. “Business owners who deal extensively in cash have the same legal obligation to pay their fair share of taxes as does everyone else,” said Billy J. Williams, U.S. Attorney for the District of Oregon.
Principal Deputy Assistant Attorney General Ciraolo condemned the scheme as a betrayal of public trust: “Skimming cash and keeping two sets of books cheats not only the United States, but also honest taxpayers that play by the rules.” He reaffirmed the DOJ and IRS’s commitment to targeting tax evaders, particularly those in industries where off-the-books transactions are common.
“The Kiraz’s weren’t just cheating the IRS,” said Special Agent in Charge Darrell Waldon of IRS Criminal Investigation. “They were cheating the men and women of our armed forces, anyone who drives our highways, and those who rely on social services.” The case was investigated by IRS Criminal Investigation and prosecuted by Quinn P. Harrington, Seth D. Uram, and Department of Justice Tax Division Trial Attorney Leslie A. Goemaat.
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Key Facts
- State: Oregon
- Agency: DOJ USAO
- Category: Fraud & Financial Crimes
- Source: Official Source ↗
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