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receipts on the day the receipts were earned; the rest would be
paid by check from the accountant after any expenses for that day
had been paid. Waldorf asked the other shareholders to destroy
the memo after reading it.
House of Babes paid its shareholders their share of the
profits in cash before April 1985. Around April 1985, House of
Babes began to pay its shareholders half in cash and half by
check.
Waldorf, Godby, and Wiltzius agreed to skim receipts of
House of Babes and to divert funds for their personal use. They
skimmed 50 percent of the gross receipts earned from Monday to
Friday.
House of Babes' officers gave the accountant incomplete
information to prepare House of Babes' tax returns. The
accountant used the false records to prepare the 1984 and 1985
corporate income tax returns for House of Babes. Waldorf, as
president, signed House of Babes' corporate income tax returns
for 1984 and 1985, knowing that they were materially false
because the shareholders diverted about 50 percent of the
corporation's weekday gross receipts to their personal use.
House of Babes did not report to the IRS income of $153,755.50
for 1984 and $200,620.50 for 1985.
Wiltzius was not involved in the operation of House of
Babes. He did not establish House of Babes' accounting system or
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Last modified: May 25, 2011