Connecticut Strip Club Owner to Forfeit $1.5 Million After Pleading Guilty to Tax Evasion and Money Laundering

The owner of a Connecticut strip club pleaded guilty in federal court on May 28, 2024, to tax evasion and money laundering charges connected to a wide-ranging scheme involving prostitution and the fraudulent acquisition of COVID-19 relief funds. As part of his plea agreement, Mark K. Archives will forfeit $1.5 million and pay more than $700,000 in restitution to the IRS, according to a statement from the U.S. Attorney’s Office for the District of Connecticut.

Archives, the owner and operator of Keeping It Kleen Inc., which did business as The Hollywood Connecticut Gentlemen’s Club in Southington, Connecticut, admitted to conspiring to launder money derived from a prostitution operation run out of the club. He also admitted to evading both personal and corporate income taxes by concealing large amounts of cash income generated by the business.

This case, while extreme in its details, serves as a critical warning for all business owners, particularly those in cash-intensive industries where the lines between business and personal finances can easily blur. The federal government's aggressive pursuit of tax evasion, money laundering, and pandemic relief fraud demonstrates that inadequate financial controls are an existential threat. In our experience, many well-intentioned entrepreneurs fail to appreciate the severity of non-compliance until it is too late. The cost of getting it wrong—financially, reputationally, and personally through potential incarceration—is catastrophic. Our work in tax preparation and compliance focuses on establishing robust, transparent financial systems from day one. This is the only reliable way to protect a business and its owners from the devastating legal and financial consequences of an audit or investigation. For guidance on ensuring your business meets its complex obligations, contact C&S Finance Group LLC at csfinancegroup.com.

According to court documents and statements made in court, Archives and his co-conspirators operated a prostitution business at the club for several years. The scheme involved laundering the cash proceeds from this illegal activity to conceal their origin and ownership. The $1.5 million forfeiture represents the amount of money involved in the money laundering conspiracy that Archives has agreed to surrender to the government.

In addition to the laundering scheme, federal prosecutors detailed a multi-year tax evasion effort. Archives failed to report substantial cash income from both the strip club’s legitimate operations and the illicit prostitution business. He provided his accountant with false information that significantly understated the club's gross receipts and his personal income, leading to the filing of fraudulent corporate and personal federal tax returns. The restitution of $700,000 ordered by the court corresponds to the total tax loss incurred by the IRS as a result of his actions.

The case also highlights the continued federal crackdown on the misuse of pandemic relief funds. Prosecutors revealed that Archives fraudulently obtained a Paycheck Protection Program (PPP) loan of $121,780 and an Economic Injury Disaster Loan (EIDL) of $149,900. In his applications to the Small Business Administration (SBA), he falsely certified that his company, Keeping It Kleen Inc., was not engaged in any illegal activity and specifically not in business of a “prurient sexual nature,” which would have made it ineligible for the relief programs. These funds were intended to support legitimate businesses struggling with the economic fallout of the COVID-19 pandemic.

The investigation was a coordinated effort involving the Internal Revenue Service – Criminal Investigation (IRS-CI) and the Federal Bureau of Investigation (FBI). This multi-agency approach is common in complex financial crime cases that span multiple types of offenses, from tax code violations to wire fraud and money laundering.

Archives pleaded guilty to one count of conspiracy to commit money laundering, which carries a maximum prison sentence of 20 years, and one count of tax evasion, which carries a maximum sentence of five years. He is currently released on a $100,000 bond pending his sentencing, which has been scheduled for August 20, 2024. The final sentence will be determined by a federal district court judge after consideration of the U.S. Sentencing Guidelines and other statutory factors.

Moving forward, the sentencing of Mark Archives will be the next major development in this case. Federal authorities have indicated that the prosecution of individuals and businesses that fraudulently obtained COVID-19 relief funds remains a top priority, suggesting that similar enforcement actions against other businesses across the country will continue for the foreseeable future.