CHARLOTTE, N.C. — Businessman James Smith [pictured] pleaded guilty today to a tax charge in connection with Charlotte’s high-priced prostitution ring.
Smith, identified in court papers as the owner of Red Clay Aggregate, is the second businessman to plead guilty in the federal government’s investigation into the lucrative call-girl service.
Smith, whose company provides construction services, is accused of using the services of Soft Touch Promotions Inc. and SW Associates from 2002 through October 2007.
Sallie Saxon, who ran the internet-based call-girl service from her home in southeast Charlotte, was the owner of www.HUSHHUSH.com and was operating the exclusive prostitution service under umbrella companies named Soft Touch Promotions and SW Associates, according to court documents.
The federal charge accuses Smith of falsely characterizing his transactions with Soft Touch and SW Associates as, among other things, advertising expenses on Red Clay’s corporate tax returns.
“In truth and fact, the expenses were personal in nature, and the false treatment on the corporate tax return caused the understatement of income to defendant James Smith,” the charge alleges.
Prosecutors allege that Smith did not believe to be true or correct his 2006 income tax return. The tax return, according to court documents, reported income of about $455,935.
Prosecutors say Smith owed $19,543.66 in taxes over a 5-year period.
But the charge alleges that Smith knew he received total income substantially in excess of that amount.
Smith was freed Thursday on $50,000 unsecured bond.
Smith’s guilty plea comes just five days before the scheduled sentencing of Sallie Saxon, who made millions of dollars selling sex to affluent clients.
Saxon, 58, had more than 500 clients and charged as much as $700 an hour for her prostitutes. She faces two to four years in prison.
In June, Dr. Kenneth Friedman, a cardiologist who practices near Raleigh, became the first “john” to be charged in connection with Sallie Saxon’s call-girl service.
Friedman pleaded guilty to conspiring to entice an individual – identified only as “SJ” – to travel from North Carolina to Las Vegas to engage in prostitution. He faces up to five years in prison.