Date: May 15, 2024 Contact: newsroom@ci.irs.gov Vanessa Roberts Avery, United States Attorney for the District of Connecticut, New England, Harry T. Chavis, Jr., Special Agent in Charge of IRS Criminal Investigation (CI) in New England, Michael J. Krol, Special Agent in Charge of Homeland Security Investigations (HSI), and Connecticut State Police Colonel Daniel Loughman today announced that a federal grand jury in Hartford has returned a 12-count indictment charging Kenneth Denning of Holland, Massachusetts, Joshua Baker of Willimantic, Connecticut, and William Mayo of Manchester, Connecticut, with offenses stemming from the operation of the Electric Blue strip club in Tolland, Connecticut. The indictment was returned yesterday and Denning, Baker, and Mayo were arrested today. As alleged in the indictment, Denning owned and oversaw the operation of the Electric Blue strip club, which included the employment of dancers who performed nude dances and lap dances for customers. Baker was the club’s manager and bookkeeper, and Mayo was employed at the club as a bouncer and was primarily responsible for hiring dancers, many of whom were not legally authorized to live or work in the United States. The indictment alleges that the Electric Blue had a semi-private “lap dance room” and “VIP rooms” where dancers regularly performed commercial sex acts for customers. As payment for commercial sex acts, customers would typically pay the club an entry fee for use of the lap dance room or one of the VIP rooms and then pay an additional fee directly to the dancer. In addition, the club collected cash through cover charges paid at the door and fees paid by dancers to perform at the club. Baker or another club employee would collect the cash received by the club, place the cash in envelopes noting the source of the cash, and then place the envelopes in a safe in Denning’s office. The defendants referred to this cash as “Kenny’s money,” and used this money to pay business expenses and fund Denning’s personal expenditures, including trips to casinos where Denning spent large sums of money. The indictment also alleges that Denning and Baker provided false information to the club’s tax-return preparer in 2020, 2021, and 2022 by underreporting the gross receipts from the club and excluding income derived from commercial sex acts. As much as approximately $5.7 million in business receipts were not reported to the IRS, causing a tax underpayment of more than $2 million. The indictment further alleges that Denning committed fraud by applying for and receiving an Economic Injury Disaster Loan (“EIDL”) during the COVID-19 pandemic by certifying that the business did not “present live performances of a prurient sexual nature.” Denning received a loan of approximately $150,000 in July 2020. The indictment charges Denning, Baker, and Mayo with conspiracy to use an interstate facility to promote or facilitate prostitution, an offense that carries a maximum term of imprisonment of five years, and with unlawful employment of aliens, an offense that carries a maximum term of imprisonment of six months. Denning and Baker are charged with conspiracy to file false tax returns, which carries a maximum term of imprisonment of five years, and with conspiracy to commit promotional and concealment money laundering, which carries a maximum term of imprisonment of 20 years. Denning is charged with engaging in a monetary transaction with proceeds derived from prostitution, an offense that carries a maximum term of imprisonment of 10 years, related to a cash deposit of approximately $21,700 at the Mohegan Sun Casino. He is also charged with aiding and abetting the filing of a false tax return related to his personal tax return for the 2020 tax year, an offense that carries a maximum term of imprisonment of three years, and with willful failure to file his personal tax return for the 2021 tax year, an offense that carries a maximum term of imprisonment of one year. He is also charged with wire fraud in connection with his receipt of the EIDL loan, which carries a maximum term of imprisonment of 20 years. U.S. Attorney Avery stressed that an indictment is not evidence of guilt. Charges are only allegations, and each defendant is presumed innocent unless and until proven guilty beyond a reasonable doubt. This matter is being investigated by the Internal Revenue Service Criminal Investigation (CI), Homeland Security Investigations (HSI), the Connecticut State Police, the Connecticut Department of Consumer Protection – Liquor Control Division, and the Massachusetts State Police, with the assistance of the Willimantic Police Department and Manchester Police Department. The case is being prosecuted by Assistant U.S. Attorneys Ross Weingarten and Robert S. Dearington. CI is the criminal investigative arm of the IRS, responsible for conducting financial crime investigations, including tax fraud, narcotics trafficking, money-laundering, public corruption, healthcare fraud, identity theft and more. CI special agents are the only federal law enforcement agents with investigative jurisdiction over violations of the Internal Revenue Code, obtaining a more than a 90 percent federal conviction rate. The agency has 20 field offices located across the U.S. and 12 attaché posts abroad.
