Fleiss Found Guilty of Tax Violations : Courts: The Hollywood madam is convicted in federal court of concealing income through her family and a Benedict Canyon house.

Hollywood madam Heidi Fleiss, who for three years supplied call girls to some of the world’s richest men, was convicted Thursday of conspiracy, tax evasion and money laundering in a federal case that, finally, named the names of her clientele.

The 29-year-old madam, dressed in a tan business suit, buried her head in her hands and wept as the nine-woman, three-man jury announced the verdict. The conviction was her second in less than a year, and could tack five years or more onto the three-year pandering sentence she received earlier this year in state court.

U.S. District Judge Consuelo B. Marshall scheduled sentencing for Nov. 13.

“The last two years have been a tremendous amount of pressure for me,” the Los Feliz pediatrician’s daughter stammered haltingly as paparazzi and TV camera crews jostled before her on the marble courthouse steps.

“It’s been a nightmare, and I’ve just tried to keep a little bit of dignity and get through it the best I can.” But Fleiss stopped in mid-thought as her voice caught, and she burst into tears.

As she turned to walk to the curb, where her teen-age brother was picking her up in a maroon Jeep Cherokee, a pickup truck rolled by and its driver leaned out the window, catcalling, “Hey! Heiii-deee!” The brother, Jesse Fleiss, who had sobbed when the verdict was announced, roared away wordlessly with his stricken sister in the back seat.

It was a rare breakdown of bravado for Fleiss, whose arrest in an elaborate 1993 vice sting sent shock waves through the studio corridors and power-breakfast nooks of Hollywood. Since then, she has railed at the authorities--and the johns who went unpunished by them--even as her legal proceedings rekindled the timeworn debate over whether prostitution should be considered a crime.

Fleiss, who was convicted in December on three counts of felony pandering, was appealing that conviction as federal authorities brought her to trial this year.

Specifically, the government asserted that the madam avoided taxes on hundreds of thousands of dollars of ill-gotten gains by funneling her cash into relatives’ savings accounts and into a Benedict Canyon house that had been bought in her father’s name.

Her father, Dr. Paul Fleiss, already has pleaded guilty to conspiring with Heidi to conceal her income, and to making false statements on loan documents for the $1.6-million house. Prosecutors say he probably will receive a penalty of four to 10 months in prison and a fine of $50,000 when he is sentenced this fall.

Heidi Fleiss, however, refused a plea bargain offer and pleaded not guilty, forcing a trial that not only offered a rare window into the world of high-priced prostitution, L.A.-style, but also unmasked the men she served.

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In order to prove that Fleiss was laundering ill-gotten gains, prosecutors had to prove that the income that paid the mortgage on her house had come from men who paid for prostitutes. To do this, they called three prostitutes to the stand, produced the checks with which they were paid, and then got testimony from the men who wrote the checks. All the prostitutes and all the johns were allowed to testify under a grant of limited immunity.

Actor Charlie Sheen, the star of “Platoon” and “The Three Musketeers,” testified that he had spent more than $50,000 on “sexual services” from so-called Heidi Girls. Real estate developer Sidney Shlenker, who once owned the Denver Nuggets professional basketball team, admitted that at least $10,000 in checks he had given Fleiss was for prostitutes. Mexican businessman Manuel Santos said he went through Fleiss whether he wanted women for simple companionship or for sex.

For their part, three call girls testified to a high-rolling life of $10,000 junkets and trips to Paris and Greece, with Fleiss taking 40% of the proceeds.

Kristina Wotkyns, a young bit actress from the San Fernando Valley, said there also had been a Washington, D.C., client, whose name she could not recall, who flew her to the nation’s capital for two days. Judy Geller, the daughter of a San Francisco lawyer, said her parents had no idea until she was called to testify that she had been a prostitute. Samantha Burdette, a Colorado model, said her first client paid her $7,000. Once, she said, she heard Heidi refer to another prostitute as a “cash cow.”

Meanwhile, Assistant U.S. Attys. Mark Holscher and Alejandro Mayorkas laid out the trail through which Fleiss allegedly laundered her money--a scheme in which sacks full of cash and tens of thousands of dollars in checks were dumped into savings accounts in the name of her father and her sister Shana Fleiss.

An Internal Revenue Service investigator testified that much of the money went into an account from which mortgage payments on Heidi Fleiss’ house were automatically deducted. She noted, however, that Fleiss funneled money into other relatives’ accounts as well. In one case, for example, a check for $10,000 was traced from Bob Crow, the heir to the Trammel Crow real estate fortune, to the bank account of Fleiss’ brother Jesse. Crow, prosecutors said, was an acknowledged client of Fleiss.

The prosecution case, however, was hampered by the breakdown of Shana Fleiss, who had promised to testify against her sister in exchange for immunity, and then reneged in tears on the stand. Shana Fleiss, a recovering heroin addict, told the judge she had not been in her right mind when she promised to testify. She was later charged with contempt of court and placed under house arrest for the duration of the trial.

Meanwhile, defense lawyers Tom Holliday and Robert Bonner--the latter a former federal judge and onetime head of the Drug Enforcement Administration--argued that the laundered money might have been a gift, either from one of Fleiss’ wealthy friends or from her ex-boyfriend, the late jet set financier Bernie Cornfeld.

Moreover, they contended, the fact that her money found its way into her relatives’ accounts proved only that the Fleiss family commingled their cash. To buttress those arguments, they called Fleiss’ mother and Cornfeld’s daughter Jessica.

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In the end, however, jurors were unswayed by defense arguments that Fleiss was merely a go-between for attractive young women and rich men. After six days of deliberations, they convicted her on one count of conspiracy, one count of tax evasion and six counts of money laundering. The panel was unable to reach verdicts on two counts of filing false information on bank loan documents, and the government said it probably will not retry them.

Also pending is a government demand to recover $550,000 in cash and property generated through the money-laundering scheme. That matter will be decided by Judge Marshall on Sept. 18.

Jury forewoman Mary Jo Sloan of La Mirada would not elaborate on the discussions that led to Thursday’s verdict. However, another juror, Deona Watson of Rancho Dominguez, said the decision was wrenching for at least four of the panelists, who eventually were persuaded on all but the two bank loan counts.

And, like defense lawyer Bonner, who, on the courthouse steps, castigated the government for granting immunity to “very rich and powerful men who are never going to be prosecuted,” Watson expressed ambivalence about the verdict that will punish only Fleiss.

“I think some of them [the jurors] went in there thinking guilty right from the start,” Watson said. “But I don’t feel right.

“In my heart, I feel like it wasn’t just her. . . . If they were going to get her, they should have gotten her johns, too.”

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The Verdicts

Verdicts announced Thursday in the federal trial of Heidi Fleiss:

* One count of tax evasion.

Guilty

* One count of conspiracy to evade taxes.

Guilty

* Six counts of filing a false loan application.

Deadlocked

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SENTENCING: Scheduled for Nov. 13. Prosecutors say Fleiss could receive five years or more in prison on the money laundering convictions, but estimates vary as to the total possible prison term because of intricacies in federal sentencing guidlines.

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The Fleiss Case

Hollywood madam Heidi Fleiss was convicted on eight counts Thursday in her trial on federal charges. Here is a look at the disposition of other charges in the case:

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State Trail of Heidi Fleiss

* Three counts of procuring for prostitution. Guilty.

* Two other counts of procuring for prostitution. Deadlocked.

* One count of sale or transportation of a controlled substance, cocaine. Not guilty.

SENTENCE: Three years in prison. An appeal is pending.

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Federal Prosecution of Paul Fleiss, Heidi’s Father

Pleaded guilty in May to three felony counts of conspiring with his daughter to defraud the Internal Revenue Service by concealing her income over three years and of making false statments to federal banks.

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SENTENCING: Scheduled for Sept. 11. As a result of a plea bargain, he is expected to receive a sentence of four to 10 months in prison and a fine of $50,000.

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Contempt Citation Against Shana Fleiss, Heidi’s Sister

Ordered released from custody after the verdicts were read Thursday. She had been held in contempt and confined to her home after receiving immunity in exchange for her testimony but then breaking down on the stand and refusing to continue.