Federal authorities are seeking to seize five San Antonio-area adult businesses and vacant lots as part of a massive racketeering investigation that targets 58 properties in seven states.
A 68-page indictment unsealed late Thursday in Waco charges seven people, including the alleged owner and operator of 27 businesses, John Kenneth Coil, 61, with various counts that include racketeering, defrauding the Internal Revenue Service, tax evasion, and the importation and transfer of obscene items.
The indictment alleges the owners never paid taxes on millions of dollars in income that resulted from the distribution of obscene materials.
The indictment is the tip of a five-year probe by IRS Criminal Investigation and the U.S. Bureau of Immigration and Customs Enforcement.
“This is only a piece of this case,” said Vincent Klink, resident agent in charge of the bureau’s Austin office, where the investigation is centered. “There are 100 subjects (under investigation). There will be an additional indictment and additional defendants.”
Authorities allege the organization conspired to hide income from the IRS, Johnny Sutton, U.S. attorney for the Western District of Texas, said in a news release.
“Moving in and out of numerous corporate shells, John Kenneth Coil and his enterprise generated millions of dollars from the sale of obscene materials,” Sutton said. “The defendants’ businesses, valued at approximately $9.7 million, are now subject to forfeiture action by the government.”
The indictment includes a criminal forfeiture charge that would enable the government to seize $9.7 million in proceeds, including properties across Texas, Arizona, Arkansas, Louisiana, Missouri, New Mexico and Utah. Properties in Texas dot the state, from Houston to El Paso.
Officials said Coil, of Highland Village, and his wife, Paula Katherine Coil, 42, of Flower Mound, were arrested Wednesday. His daughter Katherine Dagnino, 34, of Dallas, and his son, John Altaire Coil, 23, of Highland Village, turned themselves in Thursday, as did Curtis Wayne Castro of Dallas, a business associate and employee.
Among the suspects is Charles Phelps Jr., 47, whom Klink said is a part-time San Antonio resident and oversees adult businesses in the Alamo City and throughout South Texas. He and his son, Charles Joseph Phelps, 22, of San Juan,remained at large Thursday, officials said.
The indictment alleges the defendants were members of an organization established by John Kenneth Coil in 1981 that profited enormously by owning and operating numerous adult bookstores and arcades that sold and distributed “obscene, lewd and lascivious” materials that crossed state lines and depict incest, sado-masochism and child exploitation.
The indictment also alleges the group created fictitious businesses as “fronts,” recruited people to falsely identify themselves as business owners and operators, and used the identity of someone else to disguise John Kenneth Coil’s ownership to insulate him from criminal and civil liability.
The businesses carry mostly nondescript names such as A & Kola Inc., Arcadia Enterprises Inc., B.A.P. Inc., Crystal Cinema, Dee and Dee Enterprises Inc., Rex Temple Inc., and Sun Development Inc. Many in Texas, including four of the properties in San Antonio listed for forfeiture, carry the name or are linked to AVE Inc.
An employee who answered the phone Thursday at one of the properties, at 5521 E. Interstate 10, said the business sold and rented adult videos. He also said he was unsure how to reach the owner and referred further questions to a manager, who wasn’t available.
Other properties in San Antonio listed for forfeiture are at 4828 Loop 410 N.W.; 3310 N. Interstate 35; 9911 N. Interstate 35; and 3464 Copeland. Bexar County property records state that the Copeland address is a vacant lot.
Racketeering charges carry a maximum of 20 years in federal prison, while the other charges can result in a punishment of up to five years in prison.