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News for Norther Colorado and the world

Sunday, September 21, 2014

Madam files false tax return

Metro Denver woman surrenders for interstate prostitution related charges

DENVER – Michelle Schramm, aka Uk Chin Schramm, age 55, of Aurora surrendered to federal authorities on crimes related to her operating an interstate prostitution business, United States Attorney John Walsh, IRS Criminal Investigation Special Agent in Charge Sean Sowards and Arapahoe County Sheriff Grayson Robinson announced. Schramm was indicted by a federal grand jury in November 2010 on charges of interstate prostitution and related charges (included filing false tax returns). She was a fugitive until her surrender on March 14, 2011, where the defendant made her initial appearance in U.S. District Court in Denver. She was advised of the charges pending against her, and the associated penalties.

IRS Criminal Investigation (IRS CI) and Arapahoe County investigators also executed 6 search warrants at 5 locations, including three spas. During the course of the two year investigation, agents and officers seized well over $1,000,000.

According to the indictment, beginning on December 7, 2005, and continuing through March 17, 2009, the defendant, Michelle Schramm, controlled and operated three businesses in the Denver Metropolitan Area. The businesses were: Bali Spa, located in Arapahoe County, Malley Spa, located in Northglenn, and Green Garden Spa, also known as Beach Tanning Spa, located in Edgewater. In the course of running her spas, the defendant allegedly regularly provided prostitution services.

The defendant typically staffed her spas with a rotating staff of female workers, also known as prostitutes. The prostitutes would provide messages as well as routinely perform sexual acts for customers in exchange for money. To further the business, the defendant: 1) arranged for business locations and furniture; 2) arranged for obtaining business licenses; 3) arranged for various bills related to the business to be paid, including rent; 4) paid and arranged for advertisements through a weekly Denver magazine and on the internet and other media outlets; 5) collected proceeds from the spas and paid various workers; 6) provided lodging for various workers; 7) arranged for or provided interstate transportation for the prostitutes to or from Colorado by plane; 8) arranged for transportation of workers within Colorado through taxicabs or by automobile; and 9) supplied the prostitutes with condoms.

The indictment further alleges that Schramm used the mail with intent to otherwise promote, manage, establish or carry on the unlawful activity of operating a prostitution business enterprise. The defendant is also accused of keeping a place of prostitution. In addition, on dates certain, Schramm is accused of knowingly persuading and enticing three individuals to travel in interstate commerce to engage in prostitution. According to the indictment, she allegedly knowingly engaged and attempted to engage in monetary transactions affecting interstate commerce, in criminally derived property of a value greater than $10,000, which property was derived from specified unlawful activity, namely, the offense of persuasion and inducement of interstate travel for prostitution.

Lastly, Schramm did willfully make and subscribe false U.S. Individual Tax Returns, forms 1040, for the years 2006 and 2007.

The indictment also includes an asset forfeiture allegation, which states that upon conviction of the offenses mentioned in the indictment, the defendant shall forfeit to the United States all right, title, and interest in property, real or personal, used or intended to be used to commit the prostitution related offenses. The forfeiture allegation includes approximately $599,300 in cash seized from a storage facility in Arapahoe County, approximately $503,350 seized from various bank accounts, $6,000 in seized money orders, $13,000 in currency, and monies held in various investment accounts. The forfeiture allegation also references two properties, one located 11045 East Louisiana Place in Aurora, and one located at 5065 South Olathe Circle in Centennial.

“This case is an excellent example of federal authorities communicating with and working alongside local law enforcement,” said U.S. Attorney John Walsh. “This prostitution business was closed because of the hard work of Arapahoe County Deputies working with IRS-CI agents. All deserve credit for eliminating these brothels from the streets of Arapahoe County.”

“IRS Criminal Investigation fulfills a unique role in federal law enforcement’s counter-prostitution effort in that we track the source of funds as well as the ultimate disposition of those funds. All income, regardless of its source, is taxable,” said Sean Sowards, Special Agent in Charge, IRS Criminal Investigation, Denver Field Office.

“This time consuming and complex investigation has been brought to a successful conclusion, due to the professionalism and extraordinary efforts of the team of dedicated investigators. The lucrative criminal enterprise and the associated victimization was brought to a halt through the effective collaboration between the Arapahoe County Sheriff’s Office , IRS – Criminal Investigation , and the United States Attorney’s office . The partnership between these three entities is yet one more example of the public safety benefits that are regularly achieved through partnerships that are dedicated to solving problems,” said Grayson Robinson, Arapahoe County Sheriff.

Michelle Schramm was charged with 24 counts of use of interstate facilities to promote a business enterprise involving prostitution. If convicted of that crime, she faces not more than 5 years imprisonment, and up to a $250,000 fine, per count. Schramm is charged with 3 counts of knowingly persuading, inducing or enticing travel of persons in interstate commerce to engage in prostitution. If convicted of that crime she faces not more than 20 years imprisonment, and up to a $250,000 fine, per count. The defendant is charged with 4 counts of engaging in monetary transactions in property derived from specified unlawful activity, namely prostitution. If convicted of that crime, Schramm faces not more than 10 years imprisonment, and up to a $250,000 fine, per count. Lastly, Schramm is charged with 2 counts of filing a false income tax return. If convicted, she faces not more than 3 years imprisonment, and up to a $250,000 fine, per count.

This case is being investigated by IRS Criminal Investigation, and the Arapahoe County Sheriff’s Office.

Schramm is being prosecuted by Assistants U.S. Attorneys Tim Neff and Tonya Andrews.

The charges contained in the indictment are allegations, and the defendant is presumed innocent unless and until proven guilty.

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