NXIVM cult investigator facing tax crime sentencing

July 7, 2023

With summer here, most of us are taking advantage of this traditional season of breaks to, well, take breaks from work. I am among them. To make the end of work weeks during the summer a little easier, I'm resuming an older ol' blog feature, Tax Felon Friday. Tax offenses generally aren't as lurid as those in, for example, true crime podcasts. (Yes, I am a big fan of them.) But this first of the revived Tax Felon Friday series does have a connection to a prior prurient federal case.

In the summer of 2017, Frank Parlato, Jr. helped expose the practices of the cult-like NXIVM group.

Parlato's investigation into the purported self-help organization near Albany, New York, helped lead to the conviction of the NXIVM founder, who was sentenced to life in prison for, among other charges, sex trafficking and forced labor. Several co-conspirators were convicted and sentenced to jail on a variety of charges, including racketeering.

Five years later, Parlato found himself involved in another federal court matter. This time though, he was the defendant.

Tax evasion plea: Parlato pleaded guilty on Aug. 5, 2022, to willful failure to file federal tax returns involving cash transactions of more than $10,000.

The now 68-year-old former Niagara Falls, New York, businessman admitted he accepted cash payments totaling $19,970 from a food vendor and did not notify the Internal Revenue Service. Tax law requires the agency be alerted when cash receipts are greater than $10,000.

Part of Parlato's plea last year was an agreement to pay the IRS $184,939.51, as well as to forfeit approximately $1 million that federal agents seized in 2015 during their investigation.

Public input on potential jail time: Parlato will learn on July 20 if he also is going to jail.

The maximum sentence for the tax crime Parlato admitted committing is five years in jail. Federal sentencing guidelines recommend 24-to-30-months imprisonment. The U.S. Attorney's Office is asking that Parlato spend two years in a federal prison.

In the meantime, Parlato supporters have sent the U.S. District Court letters supporting him and asking that the judge be lenient in sentencing.

One of the 78 pro-Parlato letters is from an Albany woman who recounted how he provided her a place to stay when she was on the run with her child from NXIVM. The Buffalo News, which first reported the Parlato support campaign, has more on that letter and the others urging a light sentence for Parlato.

Prosecutors not impressed: There's no indication as to whether the judge might be swayed, but prosecutors are not.

The sentencing recommendation filed by prosecutors argues that the confessed felon is attempting "to deflect attention from his tax crimes by characterizing himself as a hero."

"Parlato should not be sentenced differently because he drops certain names or managed a business; he should be sentenced the same as any other defendant who evaded the IRS for years," wrote Department of Justice attorneys in the court filing.

The attorneys also argue that "Tax offenses represent an especially damaging category of criminal offenses, which strike at the foundation of a functioning government."

Plus, say government lawyers, "Parlato never questions — nor could he — that he failed to report substantial income. Nor does he dispute that he has openly flaunted his disdain for the IRS."

We'll know in a few weeks which correspondence the judge finds more persuasive.

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