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Onetime ‘Condo-Hotel King’ Arrested On Tax Evasion Charges

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CHICAGO (CBS) — A onetime “condo-hotel king” who once planned to open a Chicago hotel bearing Nicky Hilton’s name was arrested on federal tax evasion charges Thursday.

Prosecutors said Robert D. Falor, 43, failed to pay more than $1.75 million in federal taxes between 2004 and 2007.

Falor, the chief operator and manager of the now-defunct firm The Falor Companies, was indicted by a federal grand jury, and pleaded not guilty to the charges at an arraignment Thursday morning before U.S. District Judge Virginia Kendall.

Through various holding companies, Falor owned several condo-hotel properties, and sold individual guest rooms to investors who in turn would rent them to guests.

As of the mid-2000s, Falor’s companies operated numerous condo-hotel ventures, including the Hotel Blake, in the old Morton Salt building at 500 S. Dearborn St., and the Tides Hotel in Miami Beach, federal prosecutors said.

Prosecutors say Falor failed to pay $189,246 for calendar year 2004, $494, 261 for 2006, and $1,091,216 for 2007. He allegedly failed to file personal income tax returns, and didn’t file for 2004 until October 2007 – at which point he underreported his income, prosecutors said.

Falor also never reported millions of dollars he took in from the Hotel Blake — $1.25 million in 2006, and $2.3 million in 2007, prosecutors said. During those years, he also failed to report $2.9 million in capital gains from the dissolution of some holding companies he owned, and didn’t pay taxes on $1.65 millions in loans that became taxable income when The Falor Companies dissolved and he didn’t pay the loans back, prosecutors said.

In 2004, Falor also failed to report millions of dollars in taxable income, prosecutors said. In the 2004 tax return that he filed more than two years late, Falor so vastly underreported his income that he claimed only to owe $2,102, when in fact, he owed, $189,246, prosecutors said.

At the height of his success, Falor was known as the “condo-hotel king,” the New York Times reported in 2008. He claimed to be developing more than $1 billion properties in Chicago and Miami, and was well-known among household-name celebrities, the newspaper reported.

In particular, Falor made headlines in 2006, for his plans to open “Nicky O” hotels in Chicago and Miami Beach, branded after Paris Hilton’s younger sister, but not affiliated with the Hilton Hotel chain.

Falor had planned going to turn the Hotel Blake into the Nicky O Chicago, and also announced plans to convert to Miami Beach hotels into a Nicky O, Crain’s Chicago Business reported at the time.

But the plans never went ahead. Falor ended up suing Nicky Hilton on allegations that she breached her development contract, by failing to promote the projects as promised, and contracting out design work instead of doing it on her own, Crain’s reported.

Meanwhile, real estate agents said the Nicky O hotel-condo units that Falor was marketing in Miami Beach were priced too high and thus never sold, the New York Times reported.

The Nicky O Hotel plans were dropped in 2007, according to Crain’s. The Hotel Blake is now operated by Wyndham Hotels and Resorts.

By August 2008, Falor had fallen on hard times. The New York Times reported that Nicky Hilton and several other would-be business partners were no longer speaking to him, his wife had divorced him, and he was a co-defendant in a lawsuit filedby his own mother.

He was accused in lawsuits of pretending to own property that he did not, misusing company funds to buy a private plane and luxury cars, and claiming to be flat broke while still paying $8,000 monthly rent on a Riverwoods mansion, the New York Times reported.

If convicted of all three counts of tax evasion, Falor could face a prison sentence of 15 years and a fine of $750,000 in addition to the back taxes he owes, prosecutors said.