A Billings couple who said their prostitution business was an "immaculately clean," taxpaying operation where consenting women practiced safe sex will spend 13 months in federal prison.
Chief U.S. District Judge Richard Cebull rejected a defense request for probation, ordering prison for Gregory L. McFarland, 52, and his wife, Myong Suk "Suzie" McFarland, 62, who pleaded guilty in August to interstate promotion of prostitution and to money laundering.
Anything less would be "a slap on the wrists" and deter no one from running illegal prostitution businesses, Cebull said. The sentence was at the low end of the guideline range of 12 months to 18 months.
The couple admitted to offering sexual services at their businesses — the Far West Sauna, 1211 Mullowney Lane, and the Shangri-La Spa and Sauna, 437 Bernard St.
As part of a plea agreement, the McFarlands agreed to a criminal forfeiture of $1,176,229 as prostitution proceeds in connection with the money laundering count.
A civil forfeiture of $206,209 includes $86,000 the government sought in a separate action against the McFarlands' home at 4605 Sticka Circle. The couple also forfeited $120,209 from bank and brokerage accounts to settle the civil case. Payments on the civil forfeiture will be credited to the criminal judgment.
"I'm terribly sorry," Gregory McFarland told the judge. "I don't believe incarceration is warranted, but I do understand the reason." McFarland called imprisonment "punishment for punishment sake."
Myong Suk McFarland made no statement.
Defense attorney Vern Woodward argued for probation or house arrest, saying the McFarlands are "good, decent, kind and caring individuals."
While the McFarlands knew their business was illegal, Woodward called it an "atypical" prostitution case because they treated their employees with respect, ran a clean operation among consenting adults and filed tax returns.
The public humiliation and forfeitures already are a deterrent, and no one was harmed, he said. "The punishment should reflect the harm," he added.
"So what?" Cebull responded. "Does it lessen that fact that they violated the law? No."
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The McFarlands, the judge said, knew "full well they were violating the law by promoting prostitution in Billings, Montana. They ignored the law. And I'm supposed to ignore the law because they're 'good people?'"
Woodward said he didn't think the sentence would be a deterrent.
Assistant U.S. Attorney Kris McLean said the defense was trying to "cleanse a dirty business" that was "very, very profitable for years." Prostitution "tears at the fabric of communities" and is a serious matter, he said.
The couple faced a maximum of five years in prison and a possible $250,000 fine on the prostitution charge and a maximum 20 years and possible $500,000 fine on the money laundering count. Cebull allowed the McFarlands to report to prison when they are assigned to a facility.
The investigation began in about March 2005, when a Holiday Inn manager called the police to report that hotel guests complained that they had been offered sexual services at the Far West Sauna, McLean said.
Woodward said the duration of the investigation over several years showed that the crime is not a law enforcement priority.
The case took a long time, Police Chief Rich St. John said, because investigations into prostitution, possible human trafficking and money laundering are difficult. Federal investigators helped make sure the investigation was thorough, he said.
The police chief acknowledged that sexual services continue to be offered at Asian spas and said the department investigates complaints.
In the McFarland case, police investigators set up surveillance and talked to customers of both spas, the prosecution said. The customers, or "johns", told investigators about paying for sexual services. Detectives also visited the spas and recorded conversations about the door fees and how much more money would be needed once inside the spa. On one occasion, a prostitute talked openly about charges for various sex acts.
On Sept. 17, 2010, federal officers searched both businesses. Officers also searched the McFarlands' home and seized business records and records and ledger sheets with the names of women and allocations of money.
Income-tax records also showed that the McFarlands' business, OnJona Corp., paid 35 women, almost all of whom came from Minnesota, from 2005 until the search warrants were served.