BUFFALO — Almost seven years after a federal grand jury charged former Falls businessman and newspaper publisher Frank Parlato, and an associate, in a complex scheme “to defraud the United States and certain members of the public” and to obstruct the function of the Internal Revenue Service, the feds finally got their man.
Parlato, 67, the former owner of the One Niagara building, a local real estate investor, publisher of the Niagara Falls Reporter and editor-in-chief of the weekly newspaper ArtVoice, pleaded guilty, in U.S. District Court in Buffalo Friday morning, to a single count of willful failure to file returns involving cash transactions of more than $10,000. The transaction was a $19,970 rent payment, made in cash to Parlato, in 2010, by a vendor operating a business in the One Niagara building that he owned and operated.
The plea, to a felony charge, means Parlato faces a potential sentence, under federal sentencing guidelines, of 24 to 30 months behind bars, a fine of $10,000 to $25,000 and a period of supervised release of between 1 to 3 years. Federal prosecutors, as part of a plea agreement with Parlato, said they would not seek a prison term of more than 24 months.
U.S. District Court Judge Richard Arcara, who took Parlato’s plea, told him, “I’m not bound by (the sentencing guidelines), but I’m certainly going to consider them.” Under the plea agreement, Parlato’s defense is also permitted to ask the judge for a “non-guidelines sentence”, which might include no prison time.
“I’ll consider it,” Arcara told Parlato. “But don’t have any false impression that I’ll do it.”
The plea agreement also requires Parlato to pay $184,939.51 to the IRS and forfeit approximately $1 million that was seized as part of the investigation into his businesses in 2015.
The plea represents a small fraction of the claims federal prosecutors made when Parlato and his business associate, Chitra Selvaraj, were first indicted in November 2015. At that time, the pair faced a 19-count indictment that accused them of engaging in a conspiracy “to defraud the United States and certain members of the public, to obstruct the function of the Internal Revenue Service, wire fraud and wire fraud conspiracy, money laundering, and corrupt interference with the administration of the IRS laws.”
The indictment charged that Parlato and Selvaraj orchestrated the scheme through the use of more than 15 shell companies, 50 bank accounts, and multiple attorney trust accounts. The original indictment followed a four-year investigation into Parlato’s business dealings.
The investigation first became known in 2011, when the Gazette reported that federal agents had served subpoenas looking for records at the One Niagara building. At the time, sources said the investigation took years to complete because of the complexity of the scheme which involved the movement of large sums of cash through multiple accounts.
Prosectors claimed that as a result of the scheme, from 2006 to 2017, the IRS suffered a tax loss of approximately $390,346.
After his arrest on the first indictment, Parlato issued a defiant statement that read: “Frank Parlato is not interested in any plea deal because he does not believe he did anything wrong. He is confident, after trial, the jury will agree.”
In May 2018, Parlato and Selvaraj were charged in an 18-count superseding indictment that dropped a number of the earlier claims made by prosecutors. Parlato again maintained his innocence, saying the superseding indictment changed nothing.
“The government knew they had no case (with the original indictment) and they still have no case,” Parlato said at the time of the superseding indictment. “You’ve heard of fake news, this is a fake indictment.”
Missing from the superseding indictment were claims that Parlato defrauded business associates, including Canadian liquor business heiresses Clare and Sara Bronfman.
Parlato and Selvaraj had been facing a trial date of Sept. 13. After the plea hearing, defense attorney Herbert Greenman said, “My client pled guilty to failure to file one (IRS) 8300 form in 2010.”
As he stepped off a courthouse elevator, Greenman turned to a reporter and asked, “Do you know what an 8300 form is?”
When the reporter replied, “No,” Greenan said, “I wouldn’t think so.”
Asked for his reason for accepting the plea offer from the federal prosecutors, Parlato told the Gazette, “I ended up with one single count. I think that says something.”
Federal prosecutors told Arcara that Selvaraj is also prepared to take a plea deal.
They said a hearing for the plea is expected to take place in the next few weeks. Selvaraj’s defense attorney, Cheryl Meyers Buth, had previously indicated that her client was weighing a potential plea offer.