The Charlotte (N.C.) Observer Thursday said James Smith avoided a possible three-year prison sentence after pleading guilty to charges he claimed the prostitution fees as deductions on his corporate income taxes.

The owner of the Red Clay Aggregate construction company pleaded guilty in August to tax fraud in relation to allegations he claimed the prostitutes' services as advertising expenses.

Smith's crimes were uncovered during a federal investigation into the Charlotte prostitution ring known as "HushHush."

The services Smith admitted to writing off his company's taxes took place between 2002 and October 2007 and allegedly involved Soft Touch Promotions and SW Associates.

Both companies allegedly served as shell companies for "HushHush," whose madam, Sallie Saxon, has been sentenced to two years in prison on related charges.

The Observer said Smith will serve the first half of his sentence under home confinement.