Gregory L. McFarland and Myong Suk McFarland Arraigned and Plead Guilty in U.S. Federal Court

The United States Attorney’s Office announced that during a federal court session in Billings on August 31, 2011, before U.S. Magistrate Judge Carolyn S. Ostby, GREGORY L.MCFARLAND, 52 years old, and MYONG SUK MCFARLAND, aka Suzie McFarland, 62 years old, both residents of Billings, were arraigned and pled guilty to interstate promotion of prostitution, in violation of 18 U.S.C. § 1952(a)(3)(A) (Count I); and money laundering, in violation of 18 § 1956(a)(1)(A)(I) (Count II); as well as a forfeiture count in which they agree to forfeit $1,176,228.70 from their illegal prostitution businesses. Sentencing will be set at a later date. They are currently released on special conditions.

In an offer of proof filed by Criminal Chief and Assistant U.S. Attorney Kris A.McLean, the government stated it would have proved at trial the following:

From 2005 to 2010, numerous law enforcement agencies investigated allegations ofillegal prostitution at the Far West Sauna and Shangri-La Spa and Sauna, both located in Billings, Montana. Initially, law enforcement was informed in March of 2005 that guests of the Holiday Inn in Billings, Montana, were complaining that they had been propositioned at the Far West and that the massage parlor was offering sexual services.

During the course of the investigation, law enforcement commenced surveillance onthe Far West and Shangri-La. Law enforcement observed numerous men enter and leave the establishments. Several of the men leaving the establishments were interviewed by law enforcement and reported that upon entering the establishment, a woman greeted the customer and collected the $60 “door charge.” Sometimes the woman asked if the customer wanted to “tip” now or later. According to men, “Tip” referred to sexual services. The men reported they would pay between $200 and $300 for sexual acts to be performed by Far West and Shangri-La employees. The men confirmed that employees told them that the “madam” made all of the money from the massage and 50 percent of any additional services that the women performed. Several men also told law enforcement that they used a credit card to pay for sexual services at the businesses and it showed up on their credit card statements as Onjona Corporation. MYONG SUK “SUZIE” MCFARLAND is the president and GREG MCFARLAND is the treasurer of the Onjona Corporation #2. The men were shown apicture of MYONG “SUZIE” MCFARLAND, and confirmed that the picture looked like a person they had seen at Shangri-La and that they understood to be “Suzie.”

During the investigation, detectives with the Billings Police Department also entered the establishments with recording equipment. At both locations, a woman came to the interior door and greeted detectives. Detectives could not identify the women they spoke with through the screen. At each location, the women told the detectives that they had to pay a $60 door fee and a “tip” in the room. At each location, detectives were informed that sexual services would cost at least $200. As the detectives were leaving the Far West, they saw Suzie McFarland arrive in the Buick LeSabre and go inside.

During the investigation surveillance was conducted by law enforcement of both theFar West and the Shangri-La. Detectives observed SUZIE MCFARLAND’s and GREG MCFARLAND’s vehicles at the Far West and Shangri-La on various dates. On many nights when surveillance was conducted, SUZIE and/or GREG MCFARLAND were seen at one or the other or both the Shangri-La and Far West premises, late in the evening and at times when customers were coming and going. Both SUZIE and GREG MCFARLAND were seen transporting women on at least one occasion between establishments.

On September 17, 2010, a search was conducted by federal officers of the Far West and Shangri-La locations pursuant to search warrant. A Korean woman was present at the Far West. She was wearing lingerie. The woman stated that she had worked at the Far West and the Shangri-La for SUZIE for the past five years. She identified a photograph of MYONG SUK MCFARLAND as “SUZIE.” She also identified GREG MCFARLAND from a photograph. She reported that GREG MCFARLAND comes to the business locations to fix things and that he has also picked up money from the businesses. The charge is a $60 dollar fee plus an additional amount negotiated for sexual services. She stated it is “understood” that money is being paid for sex. Condoms and ledgers were found at the location. A similar statement was given by a woman at the Shangri-La. At the Shangri-La, sex toys were found, and many pictures of women in scanty clothing.

Also on September 17, 2010, a search of the MCFARLAND residence, located in Billings, Montana, was conducted pursuant to a warrant. The search found hundreds of pages of ledgers/tally sheets with women’s names documenting the split of money, hundreds of credit card receipts related to Far West and Shangri-La, security DVDs showing customers entering, women in scanty clothing putting money in the safe or lock box at the Shangri-La and Far West locations, and numerous other records associated with expensesfor running the businesses.

Customers paid the Shangri-La and Far West for sexual services with credit cards and cash. FBI financial analysts determined from a review of the records of all the relevant accounts that between September 17, 2005 and May 31, 2010, GREG MCFARLAND andMYONG SUK “SUSIE” MCFARLAND obtained and illegally laundered at least $1,176,228.70 from their illegal prostitution businesses. Additionally, separate tax returns filed by Onjona Corporation for tax years 2004, 2005, 2006, 2007, and 2008 indicate that Onjona Corporation is a massage parlor and that it employed independent contractors. The U.S. Income Tax Return Form 1099, submitted by Onjona Corporation reveals that it provided compensation or miscellaneous income to 35 women between 2005 and 2010, all with addresses out-of-state, with the largest majority being Minnesota. Several of these women have been interviewed and admit to working as prostitutes at the Far West or Shangri-La for GREG and “SUSIE” MCFARLAND.

GREGORY L. MCFARLAND and MYONG SUK MCFARLAND, aka Suzie McFarland, face possible penalties of 20 years in prison, a $500,000 fine, and five years of supervised release.

“Today’s change of plea by both defendants was made possible by the incredible, cooperative efforts of local and federal law enforcement. The pleas today are a step toward eradicating illegal prostitution and all of the attendant harms that come from illegal prostitution in the Billings community,” said U.S. Attorney Michael W. Cotter.

The investigation was conducted through a cooperative effort between the Billings Police Department, the Federal Bureau of Investigation, and the Criminal Investigation Division of the Internal Revenue Service.

A copy of the Offer of Proof can be obtained by contacting Sally Frank at (406) 247-4638.