News and Press Releases

Las Vegas Strip Club Owner Pleads Guilty To Conspiring To Defraud The United States

FOR IMMEDIATE RELEASE
June 1, 2006

Las Vegas, Nev. – A Las Vegas strip club owner pleaded guilty today in U.S. District Court to conspiring to defraud the United States of taxes for failing to report thousands of dollars in cash receipts, and the parent corporation of his strip club pleaded guilty to Conspiracy to Participate in an Enterprise Through a Pattern of Racketeering for participating in acts of extortion involving threats of violence, access device fraud, and mail and wire fraud, announced Daniel G. Bogden, United States Attorney for the District of Nevada.

FREDERICK JOHN "RICK" RIZZOLO, age 47, of Las Vegas, owner of "The Crazy Horse Too," pleaded guilty before U.S. District Judge Philip M. Pro to Count Two of a Criminal Information charging one count of Conspiracy to Defraud the United States of Taxes. Corporate owner of The Crazy Horse Too, THE POWER COMPANY, INC., pleaded guilty to Count One of the Criminal Information charging Conspiracy to Participate in an Enterprise Through a Pattern of Racketeering. Sixteen others, all of whom were or are employees of the Crazy Horse Too, pleaded guilty yesterday to felony charges before U.S. District Judge Kent J. Dawson. Fourteen pleaded guilty to Conspiracy to Defraud the United States of Taxes; former shift manager ROBERT D'APICE pleaded guilty to Conspiracy to Participate in an Enterprise Through a Pattern of Racketeering; and former waitress PAULA MCBRIDE pleaded guilty to making a false statement before a federal grand jury.

"This plea allows us to quickly and efficiently accomplish the primary goals of our investigation to remove the current ownership from the Crazy Horse Too strip club and bring closure to Kirk Henry and his family for the brutal and tragic extortionate attack at the club," said U.S. Attorney Bogden. "The corporate plea to racketeering charges acknowledges the serious threat that the Crazy Horse Too has presented to the community, and the 17 pleas to felony charges by past and present managers and employees of the club requires all those involved in its illegal operations to acknowledge some level of responsibility and guilt for its criminal existence. I commend all of the investigators and prosecutors who worked on these cases for their successful team effort and diligence."

According to the court records, beginning in approximately January 2000 and continuing through 2005, RIZZOLO, The Crazy Horse Too, and its employees, conspired to defraud the United States by impeding and obstructing the IRS in the assessment and collection of income and employment taxes. Dancers at the Crazy Horse Too were independent contractors who were required by the club to pay about 15 percent of their earnings to the club as a fee for the opportunity to dance. The club's managers then distributed these monies to certain male employees, including floormen, bouncers, bartenders, and shift managers as supplemental income, but failed to report or maintain records of these monies. The employees subsequently under-reported the amount of the cash salary payments they received to the club's bookkeepers. Management of The Crazy Horse Too delivered inaccurate records to the club's accountant, resulting in the preparation of inaccurate quarterly financial reports and tax returns, and provided inaccurate W-2 forms to certain employees, which the employees used to file false individual income tax returns. Management of The Crazy Horse Too, including RIZZOLO also filed quarterly federal employment tax returns which under-reported the true amount of earnings received by the conspirators in order to conceal the fraud. By failing to report or record the cash payments to the club's employees, the owners of The Crazy Horse Too and the participating employees evaded and failed to pay approximately $400,000 in FICA taxes and Medicare taxes owed to the IRS on the unreported compensation.

In pleading guilty to the conspiracy to participate in a racketeering enterprise, THE POWER COMPANY, INC. and ROBERT D'APICE admitted that The Crazy Horse Too, D'APICE, and other individuals constituted an enterprise and conspired together to participate in acts of extortion and threats, access device fraud, wire fraud, and mail fraud. If patrons refused to pay a dancer or disputed charges, the shift manager or other male employees sought to extort payment from them through threats of violence and through the actual use of force. Dancers also sought to defraud customers by overcharging customers. Incidents involving overcharges to customers frequently involved the use of credit cards or other access devices. Conspirators also sought to have The Crazy Horse Too defraud the State of Nevada of unemployment taxes and workers compensation insurance companies of premium payments by the under-reporting of employees' income.

RIZZOLO agreed to pay a $250,000 fine at the time of sentencing and pay approximately $1.73 million in restitution to the IRS. RIZZOLO also agreed that following the sale of The Crazy Horse Too, he will not own or operate or have any involvement with any strip clubs or similar businesses involved in pornography or erotic entertainment or media in the United States and its territories for the rest of his life.

THE POWER COMPANY, INC. agreed to forfeit $4.25 million, which it admitted was acquired unlawfully from racketeering activity or unlawful debt collection at The Crazy Horse Too, and pay $10 million in restitution to Kirk and Amy Henry upon the sale of The Crazy Horse Too for injuries and damages to Kirk Henry caused at the Crazy Horse Too on September 20, 2001. Kirk Henry, a customer of the Crazy Horse Too from Kansas, was left a quadriplegic as a result of his injuries at the Crazy Horse Too. THE POWER COMPANY, INC. also agreed to pay a $500,000 fine at the time of sentencing and to be jointly responsible with RIZZOLO for payment of approximately $1.73 million in restitution to the IRS. THE POWER COMPANY, INC. has agreed to sell The Crazy Horse Too within 12 months of the entry of its guilty plea. The Government has the right to disapprove the sale if the buyer is a close relative or ongoing business partner of RIZZOLO'S, is a felon, or has business dealings with organized crime members or groups.

"Due to the perseverance and dedication of the investigating agencies and U.S. Attorney's Office, justice has been served with these guilty pleas," said Steven M. Martinez, Special Agent-in-Charge of the FBI's Las Vegas Field Office. "A message has been sent that violence and the avoidance of tax liability will not be tolerated in this community."

"It does not matter who you are, or what business you are in, as Americans we are required to pay taxes, including employment taxes," said J. Wesley Eddy, Special Agent-in-Charge of IRS Criminal Investigation for Las Vegas. "Anything short of that comes with consequences as demonstrated by these guilty pleas."

The maximum penalty for the offense of conspiring to defraud the United States is not more than five years in prison and a $250,000 fine. The maximum penalty for the offense of conspiracy to participate in an enterprise through a pattern of racketeering is not more than 20 years in prison and a $250,000 fine.

All defendants were released on personal recognizance bonds pending sentencing. Their sentencing dates are set forth in Attachment A.

These cases are being investigated by the FBI, IRS Criminal Investigation, Drug Enforcement Administration, Las Vegas Metropolitan Police Department, and the Nevada Gaming Control Board, and prosecuted by Assistant United States Attorneys Eric Johnson and Timothy Vasquez.

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