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Former escort service operator gets prison term for tax evasion

Former escort service operator Manny Varagiannis was sentenced to 15 months in federal prison Monday for evading more than $230,000 in taxes.

Senior U.S. District Judge Philip Pro refused to give Varagiannis a stiffer 33-month sentence federal prosecutors sought, but he said Varagiannis might face a new criminal investigation because of information developed by prosecutors and Las Vegas police during the sentencing process.

“You have the attention of the United States and prosecution authorities,” Pro told the Greek-born Varagiannis. “Frankly, you put yourself in the spotlight.”

In court papers filed last week, Assistant U.S. Attorney Cristina Silva sought a tougher sentence, accusing Varagiannis of being “up to his old tricks” in the escort service business.

She said prosecutors were concerned Varagiannis’ claim that he sold Midnight Entertainers, one of the largest prostitution-driven escort services on the Strip, was nothing more than a sham to regain control of the lucrative company.

A confidential source told Las Vegas police that the two women who took over Midnight Entertainers, both longtime Varagiannis employees, are believed to be straw buyers, Silva wrote.

A police investigation also revealed that Varagiannis had set up a new company called CONE, which provides kickbacks to cab drivers who refer passengers to strip clubs. CONE operates next door to Midnight Entertainers, which also provides kickbacks to drivers, according to police.

The investigation, conducted in September and October with the help of undercover detectives, alleged that Varagiannis is still involved in Midnight Entertainers and its prostitution activities.

On one occasion, Varagiannis referred an undercover detective posing as a cab driver to the escort service to sign up for its kickback program, a police report said.

Varagiannis, 44, pleaded guilty in April and admitted that he failed to declare $230,651 in taxes between 2009 and 2011.

The criminal case, brought by an IRS-led financial crimes task force involving Las Vegas police, is part of a crackdown on lucrative escort services.

In court Monday, defense lawyer Richard Wright said Varagiannis’ new company is a licensed referral business that has nothing to do with Midnight Entertainers. He said the company deals only with strip clubs.

Wright said Varagiannis was ashamed and remorseful for under-reporting his taxes and hoped to avoid prison.

Varagiannis spent the past two years under court supervision and electronically monitored home detention, and he already has paid back most of the $230,651 as restitution to the IRS, Wright said.

When given a chance to speak, Varagiannis issued a terse apology for his conduct to his family.

Pro gave him until April 3 to surrender to prison authorities.

Contact Jeff German at jgerman@reviewjournal.com or 702-380-8135. Follow @JGermanRJ on Twitter.

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