Former Falls businessman and publisher sentenced to probation, home confinement in tax fraud case

Jul. 31—BUFFALO — Two uniformed U.S. marshals, handcuffs hanging from their belts, took seats in the courtroom of U.S. District Court Judge Richard Arcara as he began sentencing proceedings Monday for former Falls businessman and current newspaper publisher Frank Parlato Jr.

They left, a little over 90 minutes later, with no one in custody.

Facing a potential sentence of 18 to 24 months behind bars, Arcara instead sentenced Parlato to "time served" and placed him on one year of supervised release, with the first five months to be served in home confinement with electronic monitoring.

"The court finds a period of incarceration would serve no purpose here," Arcara said.

Federal prosectors had asked for Parlato to be incarcerated, arguing that anything less would send a message that white collar crimes, like the tax fraud-related charges he originally faced in a multi-count indictment and superseding indictment, are not serious violations of the law.

"He has every right to not like the IRS. He has every right to not like paying taxes. But he has no right to commit a crime," Assistant U.S. Attorney Charles Kruly said. "A probation sentence is not a deterrent (to others)."

Early in the hearing, as Parlato's attorneys argued for a sentence of probation, Arcara interrupted them to assert that "deterrence is a very important factor in tax cases."

But later, Arcara said, "Am I gonna make a sentence that everyone likes? Probably not."

In pressing for the probation sentence, one of Parlato's defense attorneys, Herbert Greenman, told Arcara that his client has already paid a steep price for his conduct.

"He's fully accepted responsibility. He's clearly remorseful," Greenman said. "He's suffered by being under the cloud of this indictment for so many years. He's a bit of a broken man."

Parlato, 68, the former owner of the One Niagara building, a local real estate investor, publisher of the Niagara Falls Reporter and editor-in-chief and publisher of the weekly newspaper ArtVoice, along with a co-defendant, Chitra Selvaraj, were originally indicted in 2015 after a four-year investigation into his business dealings. The investigation first became known in 2011, when federal agents served subpoenas looking for records at the One Niagara building.

Parlato and Selvaraj were accused of orchestrating a scheme to defraud the IRS through the use of an array of limited liability corporations and partnerships. The indictment cataloged the use of more than 15 so-called shell companies, 50 bank accounts and multiple attorney trust accounts in perpetrating the scheme.

Prosecutors charged the scheme involved the movement of large sums of cash through multiple accounts.

In May 2018, a superseding indictment dropped a number of the charges originally made by prosecutors. The superseding indictment charged a conspiracy "to defraud the United States and certain members of the public", while also adding claims that Parlato and Selvaraj attempted to obstruct the function of the Internal Revenue Service.

The second indictment also included charges of wire fraud and wire fraud conspiracy, money laundering, and corrupt interference with the administration of the IRS laws.

Parlato pleaded guilty in August 2022 to a single count of willful failure to file returns involving cash transactions of more than $10,000. The violation of IRS reporting requirements for cash transactions is a tax code related felony.

That charge carries a potential sentence of 24 to 30 months behind bars, a fine of $10,000 to $25,000 and a period of supervised release of between 1 to 3 years. However, the application of federal sentencing guidelines lowered the potential prison term.

In a prepared statement, Parlato told Arcara he was remorseful for his actions.

"I've heard it said that in man's greatest hour of need he stands alone. I am here now before your honor," Parlato said. "I would like to express remorse for failing to file IRS Form 8300 in 2010. I collected $19,970 in cash from a food vendor and, while I reported the income on my tax returns, I should have filed the IRS Form 8300. I promise that I will never fail to file this form or any form I'm obligated to file in the future."

Parlato said he has already paid restitution of $184,939.51 from funds that were seized from him in 2015 when he was first charged. He was also ordered by Arcara to pay a $10,000 fine.

"It's a matter of deep remorse that I was late in filing tax returns. This is something for which I'm deeply regretful. I filed late but not falsely. I never filed false returns. I pledge to this court that in the future I will faithfully file my tax returns on time, for as long as I live," Parlato said. "I'd also like to express remorse for the myriad times in my life when I could have shown more gentle mercy, and for whatever time remains in my life as I walked the path of rectitude may I be merciful just as I ask this court for mercy."

In return for his guilty plea and sentencing, federal prosecutors dismissed the remaining counts of the superseding indictment.

"I feel good, feel relived and happy to have this resolved," Parlato said after the sentencing. "It's a good resolution for me."

As he left the courtroom, one of the federal investigators who had handled his case, turned to Parlato and said, "Good luck, Frank. Stay outta trouble."

Parlato said he didn't hear the comment, but said he would have told the investigator, "The same to you."

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