A press release from the U.S. Attorney’s Office:
FORMER CONDO-HOTEL DEVELOPER ARRAIGNED AFTER BEING EXTRADITED FROM ITALY ON FEDERAL TAX EVASION CHARGE
CHICAGO — A former real estate developer who attempted to convert hotels in Chicago, Miami Beach, Fla., and elsewhere into condominium-hotels was arraigned today on federal tax evasion charges following his extradition from Italy.
The defendant, DAVID R. FALOR, who was a principal in The Falor Companies, Inc., was charged with
- two counts of federal income tax evasion
- one count of filing a false federal income tax return
in an indictment that was returned by a federal grand jury in December 2011 when Falor was living in Modena, Italy.
Falor, 73, formerly of Chicago and the Miami area, was returned to the United States on Friday after Italian courts ordered him extradited on one count of income tax evasion. He remains in federal custody after pleading not guilty this morning before U.S. District Judge Matthew Kennelly in Federal Court in Chicago.
According to the indictment, The Falor Companies, which ceased operating in 2006, attempted to convert hotels to condo-hotels by selling individual guest rooms to investors as separately titled condominium units, and renting them through a related hotel management company to other guests when the owner was not in residence, with the owner receiving a percentage of the rental fee.
The companies operated multiple condo-hotel ventures in the mid-2000s, including
- the Blake Hotel, located at 500 S. Dearborn St., in Chicago
- the Tides Hotel on Ocean Drive in Miami Beach
Falor was extradited on a tax evasion count alleging that he failed to pay income tax of approximately $341,093 on taxable income of approximately $1,048,802 during calendar year 2006.
During that year, Falor allegedly converted approximately $779,096 in payments that were recorded as loans from The Falor Companies, but which became taxable income when the companies went out of business and Falor used the funds for personal expenses. Falor allegedly failed to file a federal income tax return for 2006 or to pay any taxes.
The indictment also charged Falor with tax evasion and filing a false federal income tax return for 2005, but the government indicated in court today that those two counts will likely be dismissed at a later time because of the terms of Falor’s extradition.
In separate cases, Falor’s two sons also face federal tax charges in Chicago. Christopher Falor, a consultant to the condo-hotel projects, is awaiting sentencing after pleading guilty to mail fraud and tax counts, and Robert Falor, who was the chief operating officer of The Falor Companies, is in custody awaiting disposition of tax charges.
Gary Shapiro
The developments were announced by Gary S. Shapiro, United States Attorney for the Northern District of Illinois; James C. Lee, Special Agent-in-Charge of the Internal Revenue Service Criminal Investigation Division in Chicago; and Thomas P. Brady, Inspector-in-Charge of the U.S. Postal Inspection Service in Chicago.
The government is being represented by Assistant U.S. Attorneys Ryan S. Hedges and Barry Jonas.
Tax evasion carries a maximum penalty of five years in prison and a $250,000 fine. In addition, defendants convicted of tax offenses face mandatory costs of prosecution and remain civilly liable to the Government for any and all back taxes, as well as a civil fraud penalty of up to 75 percent of the underpayment plus interest. If convicted, the Court must impose a reasonable sentence under federal statutes and the advisory United States Sentencing Guidelines.
The public is reminded that an indictment contains only charges and is not evidence of guilt. The defendant is presumed innocent and is entitled to a fair trial at which the government has the burden of proving guilt beyond a reasonable doubt.