Parlato co-defendant takes plea offer in federal tax fraud case

Jan. 6—BUFFALO — The woman federal prosecutors claim was Frank Parlato's partner in crime has pleaded guilty to a single count of willful failure to file an income tax return.

Chitra Selvaraj's plea, in a deal with federal prosecutors, follows an earlier plea, in August, by Parlato to a single count of failure to file an IRS form in 2010 for the receipt of more than $10,000 in cash.

The pleas effectively bring to a close a seven-year saga and two federal grand jury indictments that accused Parlato, a former Falls businessman and newspaper publisher, and Selvaraj, described as "an associate" and "personal assistant", of operating a complex scheme "to defraud the United States and certain members of the public" and to obstruct the function of the Internal Revenue Service."

In a proceeding before U.S. District Court Judge Richard Arcara, Selvaraj admitted that, in 2009, she worked as the manager of the One Niagara building in the Falls. The building, at that time, was owned by Parlato.

Selvaraj said she earned a gross income of $150,000 in her management role, but never filed a 2009 income tax return with the Internal Revenue Service (IRS). As a result, according to prosecutors, Selvaraj also failed to pay $42,000 in income taxes for 2009.

The maximum possible sentence that Selvaraj faces is 1 year in prison and a $25,00 fine. However, under federal sentencing guidelines, she is likely to be sentenced to a prison term of 10 to 12 months and a fine of $3,000 to $25,000.

Selvaraj, who is not a United States citizen, could also face deportation proceedings as a result of her plea. She is currently scheduled to be sentenced by Arcara on May 10.

Parlato, 67, the former owner of the One Niagara building, a local real estate investor, publisher of the Niagara Falls Reporter and editor-in-chief of the weekly newspaper ArtVoice, previously pleaded guilty, before Arcara, to a single count of willful failure to file returns involving cash transactions of more than $10,000. The transaction was a $19,970 rent payment, made in cash to Parlato in 2010 by a vendor operating a business in the One Niagara building.

The plea to that felony charge means Parlato faces a potential sentence, under federal sentencing guidelines, 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. Federal prosecutors, as part of a plea agreement with Parlato, said they would not seek a prison term of more than 24 months.

Arcara, when he took Parlato's plea, told him, "I'm not bound by (the sentencing guidelines), but I'm certainly going to consider them." Under the plea agreement, Parlato's defense is also permitted to ask the judge for a "non-guidelines sentence", which might include no prison time.

"I'll consider it," Arcara told Parlato. "But don't have any false impression that I'll do it."

The plea agreement also requires Parlato to pay $184,939.51 to the IRS and forfeit approximately $1 million that was seized as part of the investigation into his businesses in 2015.

The pleas represent a small fraction of the claims federal prosecutors made when Parlato and Selvaraj, were first indicted in November 2015. At that time, the pair faced a 19-count indictment that accused them of engaging in a conspiracy "to defraud the United States and certain members of the public, to obstruct the function of the Internal Revenue Service, wire fraud and wire fraud conspiracy, money laundering, and corrupt interference with the administration of the IRS laws."

The indictment charged that Parlato and Selvaraj orchestrated the scheme through the use of more than 15 shell companies, 50 bank accounts, and multiple attorney trust accounts. The original indictment followed a four-year investigation into Parlato's business dealings.

The investigation first became known in 2011, when the Gazette reported that federal agents had served subpoenas looking for records at the One Niagara building. At the time, sources said the investigation took years to complete because of the complexity of the scheme which involved the movement of large sums of cash through multiple accounts.

One former federal prosecutor said the scheme operated "like a game of Whack-A Mole."

Prosectors claimed that as a result of the scheme, from 2006 to 2017, the IRS suffered a tax loss of approximately $390,346.

After his arrest on the first indictment, Parlato issued a defiant statement that read: "Frank Parlato is not interested in any plea deal because he does not believe he did anything wrong. He is confident, after trial, the jury will agree."

In May 2018, Parlato and Selvaraj were charged in an 18-count superseding indictment that dropped a number of the earlier claims made by prosecutors. Parlato again maintained his innocence, saying the superseding indictment changed nothing.

"The government knew they had no case (with the original indictment) and they still have no case," Parlato said at the time of the superseding indictment. "You've heard of fake news, this is a fake indictment."

Missing from the superseding indictment were claims that Parlato defrauded business associates, including Canadian liquor business heiresses Clare and Sara Bronfman.

Asked for his reason for accepting the plea offer from the federal prosecutors, Parlato told the Gazette, "I ended up with one single count. I think that says something."

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