Judge to decide if former strip club owner should return to jail

Federal probation officials say former Crazy Horse Too owner Rick Rizzolo unlawfully hid $1 million from the sale of a Philadelphia strip club from them for more than two years.

And now they want a judge to send him back to prison for violating the terms of his April 4, 2008, supervised release.

In court papers unsealed Tuesday, probation officer Eric Christiansen said Rizzolo received the $1 million the day before his release but kept the news from officials until they confronted him about it last September.

Christiansen said Rizzolo also initially concealed a series of subsequent business transactions he conducted after receiving the cash windfall.

Rizzolo has since admitted spending $10,000 to put the $1 million in a secret offshore account, Christiansen said. Rizzolo also admitted giving $600,000 to his ex-wife, Lisa; $200,000 to his late father, Bart Rizzolo; and $100,000 to the law firm Patti, Sgro & Lewis.

U.S. District Judge Philip Pro set a March 29 hearing on whether to revoke Rizzolo's supervised release over those actions.

Rizzolo, long suspected of having ties to organized crime, pleaded guilty to a felony tax charge in June 2006 to put an end to a decade-long FBI racketeering investigation.

As part of his plea deal with the government, Rizzolo agreed to pay several million dollars in fines and back taxes, along with $10 million in restitution to a Kansas City area man who was paralyzed after a fight over a bar tab at the Crazy Horse Too in 2001.

Rizzolo ultimately served 10 months of his one-year prison sentence.

Both Rizzolo and his lawyer, Dominic Gentile, who were in court Tuesday for a hearing before Pro, declined to comment on the revocation proceedings.

Word of the petition's filing under seal was disclosed at the hearing, which had been requested by lawyers for the Kansas City man, Kirk Henry. The attorneys had independently asked Pro to send Rizzolo back to prison for violating the terms of his release and ducking his responsibility to pay the quadriplegic the remaining $9 million plus interest he is owed.

One of the lawyers, Stan Hunterton, referred to the unreported $1 million Rizzolo received on April 3, 2008, as a "get out of jail gift" and said Rizzolo was supposed to get an additional $2 million from the sale of the Philadelphia strip club.

Henry's lawyers have alleged that Rizzolo led a wealthy lifestyle after being released from prison, running up $900-plus nightclub and restaurant tabs, maintaining hundreds of thousands of dollars in foreign trusts and dealing only in cash.

Through it all, Hunterton charged Tuesday, Rizzolo has failed to pay any money to Henry and his wife, Amy. Hunterton accused Rizzolo of coming to court wearing a $10,000 watch.

"This is absolutely a disgrace," Hunterton said. "He's a millionaire strip club operator, a wise guy ... and he doesn't have to play by the rules."

Hunterton told Pro that Rizzolo's main goal in life is to avoid paying the Henrys.

"The only thing that this man understands is being locked up," Hunterton added.

In the end, Pro said the Henrys, as victims, didn't have standing in court to seek the revocation of Rizzolo's supervised release. But the judge said the government does have standing, and he opted to allow prosecutors to make a case to take away Rizzolo's freedom at the March revocation hearing.

In his court papers, Christiansen said it was "unfortunate" that both Rizzolo and the government were unable to sell the Crazy Horse Too.

"Otherwise, Rizzolo's financial gyrations would be moot," Christiansen wrote. "Nevertheless, he is obligated to make the victim as whole as possible and to be forthright to the probation office."

The government took control of the now-closed strip club more than three years ago but could not find a buyer for it in a depressed real estate market.

The club, once a hangout for celebrities, politicians and even underworld figures, was worth as much as $35 million when the U.S. Marshals Service began entertaining offers. Today, conservative estimates put the value of the property, which has lost its ability to operate as an adult nightclub, at roughly $2.5 million.

Rizzolo's lawyers have argued that the government "squandered" the value of the club by failing to sell it in a timely fashion. Rizzolo had been hoping to pay his debts, including those to Henry, with proceeds from the sale.

In court Tuesday, Gentile told Pro that Rizzolo originally expected to receive a $15 million profit from the sale of the club after paying off all his debts.

Assistant U.S. Attorney Eric Johnson, who oversaw the criminal prosecution of Rizzolo, said the club's sale now will barely make a dent in Rizzolo's massive debts.

Last month, Pro gave the Marshals Service a May 3 deadline to sell the property "by any lawful means, including public auction."

Contact Jeff German at jgerman@reviewjournal.com or 702-380-8135 or read more courts coverage at lvlegalnews.com.