Strip club owner undressed for software-based tax scam

Detroit strip club owner tried to hide $500,000, DoJ says

A  strip club owner who thought he'd use some fancy software to outwit the Internal Revenue Service was this week sentenced to a year in prison for the scam.

Nicholas Faranso of Farmington Hills, Mich., was sentenced for conspiring to defraud the United States, the Department of Justice and IRS said.  Faranso pleaded guilty on Jan. 12, 2011 to failing to report more than $500,000.

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According to the DoJ, Faranso was the owner of two strip clubs:   BT's in Dearborn, Mich., and Tycoon's in Detroit.   From 2001 through 2004, both establishments used a computerized point of sales system which produced guest checks and electronically tracked and recorded sales.   Court documents reveal that, in 2001, Faranso purchased a computer software program called Journal Sales Remover from Theodore Kramer, a self-employed computer software salesman.   The software was specifically designed to remove a portion of the actual sales from the computerized point of sales systems.   The program would make it appear that Faranso's clubs received less income than they actually did.    

Faranso directed Kramer to put the Journal Sales Remover program onto his businesses' computer systems in order to help the club owner cheat on the businesses' taxes, the DoJ stated.  

From about 2001 to about 2004, at Faranso's request, Kramer made periodic visits to Faranso's clubs to run the Journal Sales Remover program to remove a substantial amount of the actual sales from the computerized sales systems.   Faranso then provided the reduced sales figures to his accountant.   As a result, Faranso falsified the clubs' tax returns by understating their gross receipts by more than $500,000, the DoJ stated.

Kramer pleaded guilty to one count of conspiracy last year.

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