INDIANAPOLIS -- The proprietors of two adult massage spas in Columbus, Ind., have pleaded guilty to tax evasion crimes and the State of Indiana has locked in conditions to prevent them from operating such businesses in the future, Indiana Attorney General Greg Zoeller said today.
The conclusion of the two sets of cases came one year after Columbus police and the Attorney General’s Office conducted warrant searches at two Asian massage therapy spas where acts of prostitution were alleged. As a result of the raid, four people were arrested and the State obtained court orders prohibiting the two spas from engaging in any customer transactions. As part of their plea agreements and probation, all four defendants now have agreed to not operate or work in a spa or massage parlor, and the State has sought additional civil conditions to prevent them from operating any sort of business in Bartholomew County.
“Merchants who neither collect nor remit state sales tax and participate in other illegal conduct that detracts from the community’s quality of life are not engaged in legitimate commerce. My office worked collaboratively with the City of Columbus and the Bartholomew County Prosecutor’s Office to take appropriate legal action against these individuals to rectify an intolerable situation,” Zoeller said.
“The City of Columbus greatly appreciates the assistance of the Indiana Attorney General’s Office in closing these two massage parlors. Our goal was to put an end to the kind of activities taking place at these establishments, and we successfully shut down these businesses with the help of the Attorney General’s Office,” Columbus Mayor Kristen Brown said.
“When we called seeking assistance with the complicated tax evasion issues involving these defendants, the Attorney General’s Office immediately responded with a team that helped us assemble the case necessary to bring about the successful prosecutions and closure of the businesses. We greatly appreciate having this resource in the state that prosecutors and law enforcement can call upon in difficult cases,” Bartholomew County Prosecutor William Nash said.
The tax evasion cases developed from an investigation by Columbus police and code enforcement officers into multiple complaints of prostitution at the two massage parlors in Columbus: Daily Spa, located at 2630 25th St., and Ping Spa, located at 1600 Central Avenue. In reviewing tax records, the Attorney General’s Office determined that Daily Spa incorporated as a business but never remitted any retail sales tax, while Ping Spa never incorporated as a business nor registered as a retail merchant. Based on this information, the Columbus Police Department obtained search warrant for financial records of the businesses and the Attorney General’s Office obtained court orders requiring the businesses’ closure. The defendants were criminally charged March 2, 2012.
In Bartholomew County Circuit Court in March, the Daily Spa defendants, Jing Huang, 42, and Feng Bao Zhang, 48, each pleaded guilty to failure to collect sales tax, a Class D felony reduced at sentencing to a Class A misdemeanor.
The Ping Spa defendants also pleaded guilty: Xiaoping Hoob, 55, to failure to collect sales taxes as a Class D felony, reduced to a Class A misdemeanor; and Stevan Hoob, 59, to conversion as a Class A misdemeanor.
All four defendants received one-year suspended sentences with probation. Among the terms of probation, they must not operate or work in a spa or massage parlor. Violating that or other terms of probation could result in the defendants serving their sentences in jail.
Last year the Attorney General’s Office representing the Department of Revenue also filed civil actions, called jeopardy tax warrants, against both spa businesses regarding uncollected and unpaid sales taxes. The State now has reached separate settlements with Zhang, Huang and the Hoob couple that will conclude their civil litigation and resolve the tax cases as well. Among other things, in their settlements all four defendants agreed they will not operate in Bartholomew County, will not operate any form of business in Bartholomew County for 20 years without approval of the court, and they will not operate or be employed by any massage therapy business in Bartholomew County or in any adjacent county for five years. All four also agree to divest themselves from their spa businesses, to not convey or sell their businesses to anyone else and to not reorganize under another business name.
Any violation of the terms of either settlement would entitle the State to seek $100,000 in civil damages against Zhang and Huang and $50,000 against the Hoobs.
“The criminal sentences with probation are similar to what courts might realistically impose if the cases had gone to trial, and that the probation conditions and civil settlement terms will create barriers to the defendants participating in such activity in or near Columbus. If they decide to flout the law again, we will use the resources of my office to shut them down again,” Zoeller said.
The Attorney General’s Office which enforces state sales tax laws has previously pursued criminal or civil actions against other sales-tax evaders, including unlicensed commercial dog breeders, a cash-and-carry stereo salesman, a notary public who engaged in unlawful practice of law and a tax-evading window-glass repairman.