Denver Madam Sentenced For Tax Evasion

A Denver woman who evaded taxes while she owned a prostitution business has been sentenced.

36-year-old Brenda L. Stewart of Denver, Colorado, was sentenced Monday morning to time served, followed by two years of supervised release, with the condition that the first year be served in home detention with electronic monitoring for tax evasion in connection with income derived from her prostitution business. The court also ordered Stewart to pay restitution totaling $61,489 to the IRS.

Stewart was indicted by a federal grand jury in Denver on November 17, 2010. She pled guilty on July 6, 2011.

According to the plea agreement, in approximately May of 2005, Stewart agreed to purchase a prostitution business in which she was employed, known as Denver Sugar and Denver Players. Stewart agreed to pay the previous owner, Scottie Ewing $150,000 for the business. Stewart further agreed to make these payments in cash at the request of Ewing.

Also in May 2005, Stewart created an entity called Phoenix Media and Consulting, LLC. This entity performed no media or consulting work. Instead, it was used as a front company to conduct the prostitution business operations, including credit card transactions, making payments and making purchases. The defendant also used Phoenix Media as a means to hide the source and true amount of her income from the IRS.

From approximately May 2005 through January 2008, while operating Denver Sugar and Denver Players, Stewart employed a number of prostitutes, in violation of state law. Customers who paid in cash were charged approximately $300/hour, which customers who paid with credit cards were charged approximately $350/hour. Stewart received approximately one-third of these fees, and the individual prostitutes received approximately two-thirds. Further, Stewart made all of the management decisions for the two companies, including hiring and firing decisions.

Stewart worked mostly with cash knowing that it was difficult for the IRS to track. She intentionally failed to report income to the IRS.