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Former Las Vegas Strip Club Owner Sentenced to Prison for Conspiring to Defraud the United States

FOR IMMEDIATE RELEASE
January 23, 2007

Las Vegas, Nev. – Las Vegas strip club owner Frederick John "Rick" Rizzolo, age 48, was sentenced today in U.S. District Court to one year and one day in prison, three years of supervised release and a $250,000 fine, for conspiring to defraud the United States of taxes, announced Daniel G. Bogden, United States Attorney for the District of Nevada. The Power Company, Inc., the parent corporation of Rizzolo's strip club, "The Crazy Horse Too," was sentenced to five years probation and a $500,000 fine, for conspiring to participate in an enterprise through a pattern of racketeering through acts of extortion involving threats of violence, access device fraud, and mail and wire fraud.

"With today's sentencings, the Court wrote the final chapter of defendant Rizzolo's long control over what many believed was an impenetrable criminal enterprise involved in violence, fear and fraud," said U.S. Attorney Bogden. "The Court also took important steps toward ensuring Kirk Henry and his family received through our justice system, the restitution they need to cope and deal with the brutal and tragic attack Crazy Horse Too employees inflicted upon Kirk Henry in September 2001. In rendering its sentence, the Court took particular care to note in the context of its 26 years on the Nevada federal bench, the 'enormity' of the financial responsibilities defendants assumed as part of their sentences as negotiated by our office as part of their plea agreements. I am proud of the work of our office and the investigative agencies which allowed us to effectively negotiate and reach a plea agreement with defendant Rizzolo, the Crazy Horse Too and 15 other defendants involved in the illegal operations of the strip club," said U.S. Attorney Bogden.

Both defendants were ordered jointly responsible for payment of approximately $1.73 million in restitution to the IRS. The Power Company, Inc. was also ordered to pay $10 million in restitution to Kirk and Amy Henry for injuries and damages to Kirk Henry caused at the Crazy Horse Too in September 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. must also forfeit $4.25 million, acquired unlawfully from racketeering activity or unlawful debt collection at The Crazy Horse Too.

Rizzolo pleaded guilty last June to one count of Conspiracy to Defraud the United States of Taxes. The Power Company, Inc. pleaded guilty last June to Conspiracy to Participate in an Enterprise Through a Pattern of Racketeering. Rizzolo must self-surrender to federal prison no later than May 22, 2007.

Sixteen others, all of whom were or are employees of the Crazy Horse Too, also pleaded guilty last May to felony charges. 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. One defendant, Michael Muscato, 54, was sentenced on January 17, 2007, before United States District Judge Kent Dawson to five years probation for his involvement in the conspiracy to defraud the United States of taxes. The remaining defendants will be sentenced before Judge Dawson starting with defendant Vincent Faraci tomorrow, January 24, 2007, and continuing on a weekly basis through March 2007.

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.

The Crazy Horse Too, co-defendant Robert D'Apice, and other individuals conspired 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.

As part of Rizzolo's conditions of supervised release and pursuant to his plea agreement, Rizzolo is not permitted to 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. Additionally, defendants' plea agreements require The Power Company, Inc. to sell The Crazy Horse Too by June 1, 2007. 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.

The cases were 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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