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Sep 26, 2003 12:00 AM PDT    Text size: 
San Antonio -- As part of a five-year ongoing investigation by the Internal Revenue Service (IRS) and Customs Enforcement, the hammer fell today on seven people, including the owner and operator of a chain of adult entertainment businesses in Texas, New Mexico, and Arizona.

Five suspects, with two remaining at large, have so far been indicted on charges of racketeering, defrauding the IRS, tax evasion, mail fraud, and importing and distributing obscene materials, a spokesperson for the U.S. Attorney's Texas office told XBiz.

The arrests of John Kenneth Coil, his wife, daughter, son, and employees are part of a 68-page indictment that accuses the primary suspect, Coil, of profiting from millions of untaxed dollars from the sale of adult entertainment materials.

"Proceeds that this enterprise earned through the sale of obscene material were not disclosed to the IRS," the spokesperson told XBiz.

The indictment alleges that Coil ran an organized establishment of more than 27 adult entertainment stores and arcades that profited from the distribution of "lewd and lascivious" materials.

Coil is accused of using corporate shells to hide profits from the sale of adult videos and magazines, which authorities believe generated millions of dollars.

The defendant's businesses, valued at approximately $9.7 million, are now subject to forfeiture by the government, including properties in Texas, Arizona, Arkansas, Louisiana, Missouri, New Mexico, and Utah.

An indictment is a formal accusation of criminal conduct, not evidence, the attorney's office stated. A continuing investigation into Coil's business practices is underway. But if convicted, he faces up to 20 years in federal prison and an additional five years for each remaining charge against him. His wife, children, and employees also face stiff prison sentences for their involvement.

According to a representative for the U.S. Attorney's Austin Bureau, today's arrests are only the tip of the iceberg and dozens of more people will be indicted by the time the investigation concludes.

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