Former nightclub VIP host gets prison in tip scheme

A former nightclub VIP host was sentenced Friday to two months in prison for filing a false 2006 tax return in a $7 million tip-concealing scheme on the Strip.

Ali Olyaie, 32, is one of five defendants who pleaded guilty in the tip scheme, which occurred at the Caesars Palace nightclub between 2005 and 2007.

Chief U.S. District Judge Robert Jones handed out the short prison time, eight months less than what federal prosecutors had recommended, after Olyaie broke down in tears in court and begged for leniency.

Jones also ordered Olyaie, who now lives in Washington state, to pay the Internal Revenue Service $29,196 in restitution, which he owes for the 2006 tax year.

And the judge fined Olyaie $5,000 and ordered him to serve one year of supervised release after he gets out of prison.

Olyaie, who is free on his own recognizance, has until Dec. 7 to surrender to federal authorities.

'BASIC TAX OBLIGATIONS'

Trial attorneys with the Justice Department's Tax Division in Washington, D.C., had sought the stiffer 10-month prison sentence, arguing Olyaie blatantly ducked his responsibility to declare his tips and was alleged to have participated in an insurance fraud scheme as he was working out his plea agreement.

In court papers, prosecutors Joseph Rillotta and Christopher Maietta said Olyaie hid the bulk of his tips, more than $256,000, from the IRS between 2005 and 2007.

"The defendant's willful and blatant failure to comply with his most basic tax obligations gave rise to this criminal action," they wrote.

The prosecutors said they recently learned of allegations that Olyaie had participated in an insurance fraud scheme.

"It seems unseemly at best and contemptuous at worst that, at the same time Olyaie was negotiating his plea deal, with all of the explicit and implicit promises of good behavior that this entails, he was arranging to hand the keys of his truck over to an arsonist in order to scam his insurer," the prosecutors wrote.

Rillotta declined to say outside the courtroom on Friday whether prosecutors would appeal the sentence.

Earlier this year, Rillotta and Maietta indicated they were appealing the light sentence given to former Pure co-owner Steve Davidovici, a longtime player in the Strip nightclub business.

Prosecutors had sought $141,306 in restitution and 18 months behind bars for Davidovici, 48, who pleaded guilty in March to filing a false 2006 tax return in the scheme.

Dawson ordered the restitution but placed Davidovici on three years of probation with eight months of electronically monitored home detention, saying he was concerned the former nightclub operator wouldn't get the treatment he needed in prison for a serious eye condition.

Dawson briefly held up Davidovici's sentence after word surfaced that the judge's 38-year-old son, Brian, worked for another nightclub club once associated with Davidovici.

Eventually, Dawson concluded that he had no conflict of interest, and he ordered Davidovici to start serving his sentence.

In the meantime, the FBI's public corruption squad in Las Vegas launched a criminal investigation into the younger Dawson's relationship with Davidovici.

Last month Dawson took himself off both the Davidovici and Olyaie cases without explanation, and Jones took them over.

On Friday, Jones told Rillotta up front that he has a history of handing out lighter sentences to defendants who defraud the government. He called the government "big boys" who, unlike average citizens, have plenty of resources to get their money back.

Jones, however, raised concerns about Olyaie's dealings in the nightclub business.

'PRETTY GOOFY OUTFITS'

"He's been employed by some pretty goofy outfits," Jones said.

Olyaie's lawyer, Chris Oram, told the judge that his client wasn't the "smartest man" and got caught up in the alluring nightclub business, which led him to making poor choices.

"He was playing the role that was required," Oram said. "I have no doubt, as he sits here now, that he realizes he is in deep trouble."

When it came time for Olyaie to address the judge, he appeared to be choked up.

With his voice breaking, he said, he was "really sorry" and promised to be a "good citizen" in the future if the judge allowed him to remain free.

But Jones said he felt the need to "impose some jail time."

Afterward, Oram said he was "pleased" that the time was less than the government's recommendation.

Contact reporter Jeff German at jgerman@reviewjournal.com or 702-380-8135.