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[ATG] Search warrants served on Columbus massage parlors; businesses ordered closed
Start Date: 3/2/2012
End Date: 3/2/2012
Entry Description

COLUMBUS, Ind. – Today, local and state authorities served search warrants at two adult massage parlors in Columbus and took action in civil court to close the businesses because of unpaid sales tax. The prosecutor has criminally charged four proprietors with corrupt business influence and tax evasion, and the investigation into the two massage parlors continues.

 

Assisting the Columbus Police Department, Bartholomew County Prosecutor’s Office and other agencies in the warrant search, the Indiana Attorney General’s Office today sought and obtained civil judgments called tax jeopardy assessments against the two adult businesses and their owners. No sales tax has been remitted from either business, in violation of state law. Under the civil judgments the court entered today, both massage parlors are ordered closed.

“My office worked with local law enforcement to collaborate in taking legal actions against the individuals being charged with crimes by the prosecutor. We allege in addition to the crimes charged that as merchants they neither collect nor remit sales tax and therefore fail to meet a basic state legal obligation. Such tax evasion, coupled with the other crimes the prosecutor alleged, makes it clear that these two operations cannot be considered legitimate commerce by any stretch of the imagination,” Indiana Attorney General Greg Zoeller said.

Investigators with the Columbus Police Department, accompanied by the Attorney General’s Office, served search warrants today on both massage parlors seeking financial records. The businesses searched and ordered closed as a result of the separate civil tax judgments are:
 

  • Daily Spa, located at 2630 25th St., Columbus
  • Ping Spa, located at 1600 Central Avenue in Columbus.

The tax evasion cases developed from an ongoing investigation by Columbus police and code enforcement officers into complaints of alleged prostitution at both massage parlors.

In reviewing state records, Attorney General’s Office determined that Daily Spa had incorporated as a business on June 5, 2010, but never remitted any retail sales tax to the state since then. Ping Spa never incorporated as a business or registered as a retail merchant, records showed. 

Indiana’s lodging statute was amended in 1989 to say that renting out a room, cubicle or space for massages makes a business subject to paying sales tax for the transactions. Also, any business that owes sales tax must keep financial books and records for inspection by the state. 

The Attorney General’s Office has a role in enforcement of state tax laws. The civil tax jeopardy assessment obtained today by the Attorney General’s Office requires Daily Spa and its proprietors to remit $146,873.09 for unpaid tax between October 31, 2010, and December 31, 2011. The jeopardy assessment against Ping Spa and its proprietors requires them to remit $215,347.39 for unpaid tax between June 30, 2010, and December 31, 2011. The amounts reflect the base tax, fraud penalty and interest.

The Attorney General’s Office today obtained temporary restraining orders prohibiting the businesses and their owners from conducting sales transactions. The orders require the businesses to be closed until a hearing on the State’s motion for an injunction at 1:30 p.m. March 8 in Bartholomew Circuit Court.

At the Attorney General’s Office’s request, police posted notices at the two businesses stating sales transactions can’t occur there because they lack a retail merchant’s certificate. The signs warn that it is a misdemeanor to conduct sales at a business once notice has been posted.

 

The civil tax jeopardy assessment against Daily Spa for unpaid sales tax also applies to another Indianapolis massage parlor that has the same ownership:  24 Hour Spa at 8840 N. Michigan Road, Suite 103, in Indianapolis, since it lacks a registered retail merchant’s certificate. Police also served the jeopardy assessment and posted notices today at that location, meaning no sales can be transacted there. The 24 Hour Spa was not subject to the Bartholomew County criminal search warrant, however.

 

In addition, Bartholomew County Prosecutor William Nash today filed criminal charges against two people affiliated with one massage parlor and two others connected with the second.

 


All four defendants are charged with corrupt business influence, a Class C felony, and three counts each of failure to collect or remit sales tax, a Class D felony:

 

  • The Daily Spa defendants are Jing Huang, 41, and Feng Bao Zhang, 47.
  • The Ping Spa defendants are Xiaoping Hoob, 54, and Stevan G. Hoob, 58.

The corrupt business influence charge means that defendants are alleged to have operated an enterprise through a pattern of racketeering activity by committing other criminal acts, theft and promoting prostitution.

 

Arrest warrants were issued for all four defendants by the Bartholomew Circuit Court. Details of bond will be announced later.

Zoeller is co-chair of a state task force combating human trafficking and he recently advocated for a newly-passed state law, Senate Enrolled Act 4, that closed loopholes in Indiana’s old human trafficking statute. For the warrant search today, the Attorney General’s Office made arrangements to interview witnesses about any suspicions of human trafficking. 

The criminal charges were filed in Bartholomew Circuit Court by Prosecutor Nash. The Attorney General also has limited concurrent jurisdiction to file criminal tax charges but would have had to file them in Marion County, since Indianapolis is the seat of state government. The Attorney General also has jurisdiction to file civil tax enforcement lawsuits. Since December 2008 the Attorney General’s Office has pursued criminal or civil actions or both against several tax-evaders, including a cash-and-carry stereo salesman, a notary public who engaged in unlawful practice of law, and a window-glass repairman.

Zoeller today expressed his appreciation to Columbus Police Chief Jason Maddix, Prosecutor William Nash, Mayor Kristen Brown and others in law enforcement who initiated the investigation. “The Legislature changed the state’s lodging tax in 1989 specifically to assist law enforcement in circumstances such as this, and we are happy to support our local colleagues in this complicated case,” Zoeller said.

 

 

-30-

Location Information:
Bartholomew County

State House
IN
Marion

Statewide
IN
Contact Information:
Name: Bryan Corbin
Phone: 317.233.3970
Email: Bryan.Corbin@atg.in.gov
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Attachments For This Entry:
    > Audio sound bite of Attorney General Zoeller's comment on the case.
    > Temporary Restraining Orders - Daily Spa, Fengbao Zhang and Jing Huang
    > Temporary Restraining Orders - Ping Spa, Stevan Hoob, Xiaoping Hoob
Entry Type:
Press Release
Entry Category:
  • Announcements
  • IN.gov Category:
  • Government
  • Residents
  • Taxes & Finance
  • Agency Name
    Attorney General

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