Porn producer offered to pay debt to Wynn only if it couldn’t be traced

While behind bars in Reno on tax evasion charges in June 2007, "Girls Gone Wild" producer Joe Francis made an unusual offer to pay back a $2 million gambling debt to Wynn Las Vegas.

He told a Wynn executive that the Strip resort would get the money he owed from a weeklong losing streak in February 2007, as long as it couldn't be traced back to him.

But the Wynn never took Francis up on his offer, and Francis never paid back the $2 million.

Larry Altschul, an executive vice president who spends his days luring high-rolling celebrities to the Wynn, provided details of his jailhouse conversation with Francis in testimony before the Clark County grand jury that indicted the soft-porn producer on theft and fraud charges earlier this month.

"What was going through your mind at the time he said that?" Chief Deputy District attorney Bernie Zadrowski asked Altschul.

"What I was thinking was that he had the money somewhere else, that he could take care of it, but he wanted to make sure it never got traced back to him because he would have problems," Altschul responded.

Those problems involved hiding millions of dollars from the Internal Revenue Service.

Francis was indicted in April 2007 on federal charges related to $20 million in fraudulent expense deductions on tax returns for his Los Angeles-based production company, Mantra Films. That indictment alleged Francis, 37, used offshore banks and entities owned by other people to conceal a fortune made by filming drunk college girls taking off their clothes.

Altschul testified this month that he flew to Reno to visit with Francis at the jailed producer's request, and had a discussion through a glass partition in a visitor's room, according to grand jury transcripts .

"He told me he was still going to make good on the debt," Altschul testified. "And then he asked me to research something, that the reason he wanted me to come there is he could pay through a third person as long as it wasn't traceable back to him or ... an account. But the key was it couldn't be traced back to him."

Francis would not explain why he didn't want the money traced or how he planned to get the money to the Wynn, Altschul testified.

Altschul said he asked the resort's legal counsel when he returned to Las Vegas whether it would be legal to take the money from a third party or a bank account that couldn't be traced, and the attorney responded "absolutely not."

"So we never pursued that," he said.

As relations between the Wynn and Francis soured over the $2 million debt, Altschul testified, Francis told him he wasn't concerned that Wynn might pursue criminal charges.

Francis indicated that his lawyers already had reviewed his actions and found no criminal liability, Altschul said.

"And do you know why he said this to you?" Zadrowski asked.

"The Wynn has a reputation for playing hardball and using the district attorney to collect debts if someone's not cooperating," Altschul responded.

By state law, gambling debts are prosecuted as bad checks in Nevada. A unit headed by Zadrowski handles Clark County cases.

Francis' Reno lawyer, David Houston, was out of town and unavailable for comment on the grand jury testimony. He has said the criminal case against Francis is defensible.

The final phone conversation between Altschul and Francis did not go well, as the two parted ways, according to the grand jury transcripts.

Altschul testified that Francis told him: "You made the biggest mistake of your life. You have no idea how ugly this is going to get."

Those words ended up ringing true.

The Wynn sued the flamboyant Los Angeles businessman in District Court in June 2008 to recover the $2 million and later asked the district attorney's office to open a criminal case.

Francis, who contended he owed the Wynn considerably less than $2 million, then countersued the Wynn, alleging chairman Steve Wynn used a variety of tactics to run up his gambling losses, including supplying him with prostitutes.

Wynn issued a statement calling the allegations "scurrilous beyond imagination" and filed a defamation lawsuit against Francis. It is set for trial on April 19.

The criminal case remained on hold until Francis' indictment this month, while Francis focused on his other legal troubles, including those with the IRS.

Francis eventually pleaded guilty to filing false tax returns and to bribing jail workers in Reno. He agreed to pay the IRS $250,000 in restitution.

A judge ruled in favor of the Wynn Las Vegas in the civil lawsuit and ordered Francis to pay the resort the $2 million plus interest. Francis appealed the decision to the Nevada Supreme Court, which has yet to rule.

The criminal indictment alleges Francis intended to defraud the Wynn by signing a $2.5 million marker on a closed bank account during the 2007 gambling junket.

Prosecutors said Francis paid back only $500,000 of the $2.5 million.

Francis, who is free on $132,500 bail, faces an April 27 arraignment on the felony charges.

Contact Jeff German at jgerman@reviewjournal.com or 702-380-8135.