‘Girls Gone Wild’ Founder Makes Plea Deal in Tax Case

Sep 23, 2009 10:00 AM PST
LOS ANGELES — "Girls Gone Wild" founder Joe Francis agreed to plead guilty to filing false tax returns.

Francis faced U.S. Judge S. James Otero for sentencing Wednesday afternoon and later said he was "grateful" the judge signaled a green light. Final sentencing is slated for Nov. 6.

"If the judge accepts our agreement with the government, all felony tax charges will be dismissed and I will not spend any more time in jail," he told told LA Observed via Flack. "I look forward to the complete resolution of this matter."

Francis acknowledged being "a difficult client," and thanked his lawyers.

The plea agreement on two counts of filing false tax returns and one count of bribing Nevada jail workers in exchange for food states Francis will pay $250,000 in restitution and receive credit for jail time served.

Francis and his companies Mantra Films Inc. and Sands Media Inc. were indicted on two counts of tax evasion by a federal grand jury in April 2007.

Federal prosecutors claimed Francis reported taxable income for 2002 of $13.9 million and paid $3.5 million in taxes, "when in truth and fact, he then and there knew well and believed that he had omitted additional income," according to the indictment. For 2003, Francis paid $352,000 in taxes on reported taxable income of almost $1.16 million.

The government also claimed that Francis used offshore accounts to conceal income and his companies claimed more than $20 million in phony deductions.

In addition, the government alleged Mantra overstated deductions by including more than $1 million for construction as "false footage" and professional service expenses, and falsely claimed more than $1.9 million as insurance expenses.

The amount Francis underreported, according to the plea — about $563,000 — is far less than the more than $20 million in bogus deductions prosecutors alleged Francis made. The deductions were for a Mexican home where Francis entertained celebrities, a Porsche and other items.

Francis also will acknowledge giving more than $5,000 in goods to a pair of Washoe County, Nev., jail workers in exchange for food. Francis was held at the jail from June 2007 to March 2008.

The plea comes just weeks before the start of Francis' trial, which included a recent delay after a key government witness, Francis' former accountant, turned over hundreds of previously undisclosed emails.

Francis used the emails as a basis of a suit field at Los Angeles Superior Court against his former accountant, Michael Barrett, and other former key Mantra executives, contending they set up a bogus company and fraudulently billed him for hundreds of thousands of dollars.

Francis claimed that after Barrett resigned in 2004 as the company's chief financial officer he contacted the IRS and falsely accused Francis of tax evasion.

Francis, according to the suit, said that Barrett was "hoping that the IRS would prosecute and incarcerate Francis, thereby removing the possibility" that he would "catch the ongoing theft.”

"While Barrett was secretly trying to get Francis investigated by the Reno [Nev.] division of the IRS to recover his bounty from the mistaken books he previously prepared, provided and vouched for to Francis' tax return preparers, he never disclosed any problem to Francis," the Los Angeles Superior Court suit said.

Barrett's credibility as a witness came into question in recent weeks, with Otero warning prosecutors that Barrett posed problems for them.

Otero noted that Barrett had sought a reward for turning Francis in, even though he may have also committed a crime.

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