Stanford Law grad guilty of tax evasion

January 27, 2009 10:34:03 AM PST
A Stanford University Law School graduate who ran an escort service and failed to pay income taxes pleaded guilty in U.S. District Court in San Jose Monday in a plea agreement with federal prosecutors, according to the U.S. Attorney's Office.

Cristina L. Warthen, formerly known as Cristina L. Schultz, used to live in Palo Alto and Oakland and went by the name "Brazil" to run the Web site, according to a plea agreement.

Warthen offered escort services through the Web site, which offered paid memberships, according to the U.S. Attorney.

She would charge money in exchange for sexual acts and traveled throughout the country, earning $133,000 in 2003, federal prosecutors said.

After paying for travel expenses, Warthen grossed about $81,800 that year but did not report any income to the IRS. Her income tax bill would have amounted to $25,424.

In the plea agreement, Warthen admitted that she concealed her income by putting the money in a safe deposit box, buying money orders and cashiers checks without receipts and hiding cash in her apartment, a storage locker and an old law school book.

Warthen, who now lives in Los Angeles, pleaded guilty to tax evasion Monday in an agreement to turn over a $313,133.74 cashiers check to the U.S. Treasury no later than 20 days before her June 15 sentencing date, according to IRS Special Agent Arlette Lee.

The plea agreement specifies that the amount is equivalent to the net proceeds of Warthen's unlawful activity, Lee said.

Federal prosecutors have agreed as part of the deal to ask for a three-year probation plus one-year home confinement sentence in Warthen's case, and the judge has indicated he will sentence according to the agreement, Lee said.

With tax season fast approaching, Lee issued a caution for residents to properly file and pay their taxes.

"If you pay your taxes, whether you have legal or illegal income, the IRS may not go after you specifically for tax evasion," Lee said. However, the IRS might consider money laundering or other charges related to illegal income, according to Lee.