Philly club owner faces federal tax fraud charges

by EDGE

EDGE Media Network Contributor

Friday February 5, 2010

Federal authorities indicted a local gay bar owner last week on several counts of tax fraud.

The U.S. Attorney's office alleges Michael Weiss, co-owner of Woody's and the president of the board of the after-hours club Voyeur, underreported approximately $1.6 million in income from one of his other clubs, the Palmer Social Club, in 2004 and 2005. Weiss plead not guilty to all counts on Feb. 3.

Along with Weiss, attorney Tom Bergstrom plead not guilty on behalf of the Palmer Social Club to two counts of filing false tax returns. Barnett Weiss, president and director of the Palmer Social Club and Michael's father, authorized Bergstrom to enter the plea.

Judge Elizabeth Hey approved the bail agreement Bergstrom and prosecutors reached, in which Weiss was released on $250,000. The agreement stipulated Weiss pay 10 percent of it in cash, not leave the country and surrender his passport. Weiss is only allowed to travel within the Eastern District of Pennsylvania and the Southern District of California. Weiss and his family own clubs in San Diego, of which he is involved in the active management.

Weiss will also have to report to the court if he plans to travel to California. Hey cautioned Weiss she will forfeit his bail if he fails to report for trial; in addition to facing additional charges.

The U.S. Attorney's Office unveiled the grand jury's indictment on Jan. 26. According to the indictment, the Palmer Social Club, which has held a federal income tax exemption since 1968, was aided and assisted by Michael Weiss, who, through his preparation of allegedly fraudulent financial statements, under-reported the amount of gross receipts the club had earned during the two year period.

In addition to allegations he filed false tax returns, federal authorities charge Weiss with two counts of aiding and abetting the preparation and filing of false tax returns and one count of corrupt endeavor to impede the due administration of the tax code. The International Revenue Service's Criminal Investigation Division brought the complaint. And Assistant U.S. Attorney Floyd J. Miller will prosecute the case.

Weiss could face up to nine years in prison and a fine of up to $750,000 if convicted. The Palmer Social Club could face a maximum fine of approximately $350,000 under the federal sentencing guidelines.

The indictment culminated a five-year IRS investigation. Patricia Hartman, spokesperson for the U.S. Attorney's Office in the Eastern District of Pennsylvania, said Weiss was not arrested but self-reported for his initial appearance on Wednesday.

Weiss did not return e-mails or calls for comment.

Bergstrom said Weiss has had no direct involvement with the club since 2002 or 2003 outside of supervision of its books.

According to the indictment, a club employee collected receipts and cash every night and recorded the details on a "tally sheet." The employee then delivered the sheet and money to Weiss at his home, where he allegedly created two separate financial documents - one with the actual gross income from the night's business and a second with under-reported figures.

The indictment states the Palmer Social Club brought in "approximately $1,411,373.55" in 2004, but the form 990, a tax form used by nonprofit organizations - which the club has been registered as since 1968 - reported a gross income of just $528,228, a $883,145.55 different. The complaint goes on to say Palmer had a gross income of $1,411,390.03 in 2005, but only $641,409 was reported in that year's 990, a difference of $768,981.03. Weiss signed both years' 990s.

Bergstrom said he contests the allegations Weiss created two separate documents for both years. He also took issue with the numbers included in the indictment. And he further questioned the more-than $1-million profit the government maintains the club brought in each year.

"The Palmer Social Club is open only six hours a week, from midnight to 3 [a.m.] Friday and Saturday nights," Bergstrom said. "I think the number claimed in the indictment do not reflect that. The issue is really the accuracy of those numbers."

Voyeur, formerly Pure, also functions as a non-profit under the name Mayfield Social Club. Weiss and his brother Billy co-own the building that houses it, and they have served as managers and directors for more than a decade. The Weiss brothers also own Woody's, which they bought in Nov. 2006. They previously owned Bump, but sold the restaurant and bar last summer.

Bergstrom said Weiss does the "bookkeeping and banking for a number of businesses that he and his family own," but added he no indication the other properties are also being investigated.

Hartman said she could not comment if the other businesses Weiss with which is involved are being investigated or if other individuals could be implicated.