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T'NITED STATES DISTRICT COT]RT
%,
DISTRICT OF OREGON
3'd6"rGR-0195-'
TINITBD STATES OF AMERICA
v.
KI
INFORMATION
GILBERT "MACE" DESMARAIS,
KANDACE DESMARAIS,
18 U.S.C. S 371
- Conspiracy to Use an
Interstate Facility to Promote or Facilitate
Prostitution Offenses
Defendant.
18 U.S.C. S 371
United States
- Conspiracy to Defraud the
THE TINITED STATES ATTORNEY CHARGES:
GENERAL ALLEGATIONS
At all times relevant to this Information:
1.
The defendants and their coconspirators owned, controlled, and/or managed the
following adult entertainment businesses (collectively called "the businesses"), either
strip clubs or adult video/sex toy stores, all of which were located in the metropolitan
area
of Portland, Oregon:
o
The Landing strip (formerly known as pop-A-Top), a strip club
o
The Oh! Zone, a strip club
.
Sugar Shack, a strip club
o
Peek-A-Boos (formerly chantilly Lace), a strip club
.
Video Visions, adult video/sex toy store
2.
o
Dillingers Pub, a strip club
o
Sugar Shack Too, a strip club
o
Video Visions Plus (alVaVideo Superstore), an adult video/sex toy store
.
Tommy's, a strip club
o
Tommy's Too, a strip club
The defendants and their coconspirators also owned, controlled, and/or managed a
restaurant called Pelican Buy, located in the same cluster of businesses as Sugar
Shack, Peek-A-Boos, and Video Visions.
3.
The defendants and their coconspirators owned and operated the businesses through a
group of corporations they owned and/or controlled. The following corporations
purportedly owned and operated the following businesses:
Corporation
Pop-A-Top Pub,
Business(es) Owned and Operated
Inc.
Dillingers Pub, Inc.
Far Flung,
Ltd.
Video Super Store,
Gumptions,
Utilize,
4.
Dillingers pub
The Oh! Zone
Sugar Shack
Sugar Shack Too
Peek-A-Boos
Ltd.
Inc.
Inc.
Briney Deep,
The Landing Strip
Ltd.
Video Visions
Video Visions Plus
Tommy's
Tommy,s Too
Pelican Bay Restaurant
The defendants and their coconspirators attracted customers to the strip clubs
by
featuring fully nude female dancers.
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page2
5.
Many of the businesses had small rooms on their premises. These rooms, called
private show rooms (or just show rooms) were typically fumished with a small couch,
achait, a table, and a device for playing music. Collectively, the businesses had l9
private show rooms on their premises.
6.
The defendants placed and operated automated teller machines ("ATMs") in many
of
the businesses. The ATMs were facilities operating in interstate commerce.
7.
The IRS is an agency of the United States Department of Treasury responsible for
administering and enforcing the tax laws of the United States and collecting taxes
owed to the United States Treasury.
COUNT ONE
[18 U.S.C. S 371- Conspiracy to Use an Interstate Facility to Promote or
Facilitate Prostitution Offenses]
1.
Beginning in approximately January 2008 and ending in approxim atelyJune 2010, in
the District of Oregon and elsewhere, defendants, GILBERT "MACE" DESMARAIS
and
KANDACE DESMARAIS, did knowingly and willfully combine conspire,
confederate, and agree with other persons, both known and unknowr to the Grand
Jury, to carry out the following object in furtherance of the conspiracy:
OBJECT OF THE CONSPIRACY
2.
The defendants and their coconspirators agreed to use facilities in interstate
commerce, to wit automatic teller machines ("ATMs") operating in interstate
commerce, with the intent to promote, to manage, to establish, to carry on, and to
facilitate the promotion, management, establishment, and carrying on of unlawful
activity, namely, prostitution offenses in violation of the laws of Oregon (specifically
INFORMATION
Page 3
Or. Rev. Stat. section 167.012),inviolationof Title 18, United States Code, Section
tes2(a)(3).
MANNER AND MEANS OF THE CONSPIRACY
3.
DEfENdANtS
GILBERT..MACE,, DESMARAIS and KANDACE DESMARAIS, and
their coconspirators carried out their conspiracy using the following manner and
means, among others:
The defendants and their coconspirators allowed nude dancers, commonly
referted to as strippers, to perform at the businesses. The defendants and their
coconspirators typically, but not always, required each dancer to pay
approximately $ 15 per shift in order to perform. This payment was called a
"stage fee" or "dancer fee" and was always paid in cash.
b.
The strippers would perform 30-minute "private shows" for customers in the
private show rooms, which the defendants and their coconspirator maintained
for this purpose. To obtain a "private show" a customer had to pay at least
$160.
c.
All
customers paid for private shows in cash. Many customers obtained some
or all of that cash from ATM machines on the premises. The defendants and
their coconspirators knew and intended that customers regularly use cash from
the
d.
ATM machines to pay for acts of prostitution.
of the minimum $160 customers paid for "private shows,,, $60 went to .,the
house," meaning these funds went to the defendants and their coconspirators.
The strippers retained the remainder of the fees paid for the "private shows.,,
INFORMATION
Page 4
e.
The private shows purportedly involved a stripper performing nude dances for
the customer ffid, at most, the stripper and the customer masfurbating
themselves. In reality, the defendants, their coconspirators, many customers,
and many strippers understood and intended that a'oprivate show,, would
involve a stripper engaging in one or more acts of prostitution with the
customers and, in fact, the strippers routinely performed acts of prostitution
with their customers during "private shows." In other words, strippers
performed sexual acts on their customers in refurn for the customers having
paid the strippers at least $100 and "the house" $60, often with cash from the
ATMs.
Sometimes, the strippers negotiated a higher fee for the acts
of
prostitution than the minimum $100.
f.
Some of the strip clubs did not have private show rooms on their premises.
Strippers who were working at these strip clubs would walk with their
customers to one of the nearby businesses that had private show rooms. For
instance, the Landing Strip did not have private show rooms so strippers
working there would walk their customers across a parking lot to The OH!
Zone, which had on its premises four private show rooms and a small entry
atea.
g. To conseal
the conspiracy and to conceal their knowing involvement in the
acts of prostifution at the businesses, the defendants and their coconspirators
required the strippers to sign a typewritten statement, commonly called a
dancer slip, each time the stripper performed a private show. The dancer slip
stated the dancer was "leasing this room for the purpose of performing one-
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Page 5
on-one modeling shows" and that her "actions
state laws" and
will comply with all Oregon
"No sEx oF ANy zuND, No TOUCHING oF ANy
KfI{D!".
OVERT ACTS IN FIIRTIIERANCE OF THE CONSPIRACY
4.
DEfENdANtS
GILBERT..MACE,,DESMARAIS and KANDACE DESMARAIS, and
their coconspirators committed the following overt acts, among others, in the District
of Oregon and elsewhere, in furtherance of the conspiracy and to effect the object of
the conspiracy:
a.
The defendants and their coconspirators regularly refilled the ATMs with
proceeds from the operation of the businesses, each such
refilling being
a
separate overt act.
b.
The defendants and their coconspirators regularly accepted reimbursement for
the cash dispensed by the ATMs by means of electronic fund transfers to their
bank account in Oregon from payment-processing services located outside the
State of Oregon, each such transfer being a separate overt act.
c. The defendants
and their coconspirators allowed strippers to use the
businesses' private show rooms to perform acts of prostifution on customers,
each allowance of such use being a separate overt act.
d.
The defendants and their coconspirators required each customer involved in a
J
private show during which a stripper would perform one or more acts of
prostifution on the customer to pay $60 to "the house" as a fee for use of the
private show room, the collection of each such $60 payment being a separate
overt act.
INFORMATION
Page 6
e.
The defendants and their coconspirators required the strippers to sign a
dancer slip each time the stripper performed a private show, each such signing
being a separate overt act.
All in violation of 18 U.S.C.
S 371.
COUNT TWO
[18
u.s.c.
S 371 -
conspiracy to Defraud the united states]
Paragraphs 1 through 7 of the General Allegations, and paragraphs2through 4
Count
I
of
are incorporated herein.
OBJECTS OF THE CONSPIRACY
1. Beginning before January 1, 2008 and continuing up to and including June 16,2010,
within the District of Oregon, and elsewhere, defendants GILBERT "MACE,,
DESMARAIS and KANDACE DESMARAIS and others known and unknown to the
grand
jury, unlawfully and knowingly combined, conspired, confederated, and agreed
together to defraud the United States by deceitful and dishonest means by impeding,
impairing, obstructing, and defeating the lawful government functions of the IRS, an
agency of the United States, in the ascertainment, computation, assessment, and
collection of revenue, that is, federal individual income taxes, corporate ta:res, and
payroll taxes.
MAI\iNER AND MEANS oF TIIE CONSPIRACY
2. DEfENdANtS GILBERT..MACE,,DESMARAIS
and
KANDACE DESMARAIS and
others, known and unknown to the grand jury, carried out their conspiracy using the
following manner and means, among others:
INFORMATION
pageT
The defendants and their coconspirators established a "cash only" policy at the
businesses, in part to prevent the IRS from calculating the correct amount
of gross
receipts for each business and to facilitate the "skimming" of large amounts
of
cash.
b.
The defendants and their coconspirators destroyed or caused to be destroyed daily
records of cash receipts, including records showing private show receipts and
dancer stage fees.
c.
The defendants and their coconspirators each week reconciled or caused to be
reconciled the total cash receipts and cash expenditures for the businesses,
including the total amount of cash derived from private shows and dancer stage
fees.
d. The defendants
and their coconspirators each week delivered or caused delivery
of the accumulated cash receipts of the businesses to the home of one of the
coconspirators.
e.
The defendants and their coconspirators used or caused the use of the cash
receipts of the businesses to make cash payments for most expenses associated
with the daily operation of the businesses, including payroll, to, in part, prevent
the IRS from calculating the correct amount of gross receipts for each business
and the payroll taxes owed by the businesses.
f.
The defendants and their coconspirators each year gave a taxrefurn preparer
false
information about the amounts of receipts and payroll expenses of the businesses,
concealed from the tax return preparer all information about the cash
receipts
from private shows and dancer stage fees, and provided false information about
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Page 8
the number and identities of the employees of the businesses, intending the tax
return preparer would use this false information to prepare corporate, payroll,
and
individual tax refurns that would underreport the amount of gross income and
taxable income of, and tax due from, the businesses and the coconspirators.
g.
The defendants and their coconspirators regularly used unreported cash receipts
from the businesses to pay personal expenses.
h.
The defendants and their coconspirators regularly transported or transmitted, or
caused to be transported and transmitted large amounts of unreported cash
receipts to defendant at his residence in Mexico.
i.
The defendants and their coconspirators created and used a group of corporations
to own and operate the businesses but in reality to conceal from the IRS the true
ownership and control of the businesses and to assist in the concealment and
fraudulent understatement of business receipts, payroll taxes, ta:rable income, and
tax due.
j.
The defendants and their coconspirators caused approximately $2,600,5 92 in
taxable business receipts not to be reported to the IRS, causing a total income ta:<
underpayment of approximately $728,000.
OVERT ACTS TN FURTHERANCE OF THB CONSPIRACY
3.
In furtherance of said conspiracy and to effect the objects thereof between January
1,
2006 and continuing up to and including June 16,2010, GILBERT o.\z[4gp,,
DESMARAIS and KANDACE DESMARAIS, and others known and unknown to the
grand
jury, committed the following overt acts, among others, in the District
of
Oregon and elsewhere:
INFORMATION
Page 9
The defendants and their coconspirators destroyed daily records of the receipts
of
the businesses and directed and/or caused others to destroy daily records of the
receipts of the business, each such destruction of records being a separate overt
act.
b.
Each tax year, the defendants and their coconspirators gave a paid tax refurn
preparer false information about the receipts of the businesses, each such
occurrence being a separate overt act.
c.
For tax years 2006,2007, and 2008, the defendants and their coconspirators filed
federal corporation tax returns, federal individual income ta>r returns, and federal
payroll tax returns that, with respect to the corporation tax returns, substantially
underreported the receipts of businesses the corporations purportedly owned and
operated, with respect to the individual income
tar returns, substantially
underreported income derived from the businesses, and with respect to the payroll
tax retums substantially understated the payroll taxes due, the filing of each such
false tax refurn being a separate overt act.
All in violation of l8 U.S.C.
S 371.
Dated this 20th day of May 2015.
Respectfully submitted,
BILLY
J.
V/ILLIAMS
SETH D.
t Uni
INFORMATION
Bar No. #37624 (D.C.)
v
W. BOLIN s, osB. #aa|n
t United
Attorney
Page 10