Prosecutors want to send former strip club boss back to prison

Prosecutors on Tuesday started making their case that former strip club owner Rick Rizzolo should lose his freedom for violating the terms of his April 2008 supervised released.

Assistant U.S. Attorney Eric Johnson, who led the 2006 criminal prosecution of the former Crazy Horse Too owner, charged in federal court that Rizzolo committed a "pattern of deceit" from the very day of his April 4, 2008, release from a Las Vegas halfway house.

Rizzolo concealed from his probation officer a series of lucrative financial transactions, including several with offshore trust accounts, Johnson alleged. Some of the transactions were related to $1 million from the sale of a Philadelphia strip club one day before his release, Johnson said.

Johnson also accused Rizzolo of failing to pay the Internal Revenue Service more than $2.5 million in back taxes in recent years. He said Rizzolo owes the IRS $1.7 million stemming from his 2006 plea agreement, plus $827,000 from income earned that year.

Several IRS agents were in court as U.S. District Judge Philip Pro conducted a hearing on whether to send Rizzolo back to prison for failing to inform his federal probation officer, Eric Christiansen, about his post-prison business dealings.

Pro continued the hearing until May 9.

Christiansen testified that he did not learn of the $1 million Rizzolo received from the sale of the Philadelphia club -- and an additional $2 million he was supposed to get later -- until last summer.

Johnson said Rizzolo put the $1 million in a secret offshore account in the Cook Islands, then wired $600,000 to his ex-wife, Lisa; $200,000 to his father, Bart Rizzolo; and $100,000 to the law firm Patti, Sgro & Lewis.

One year later, Rizzolo also was supposed to get roughly $60,000 a month from the Philadelphia deal in stock sales for a total of $2 million, Johnson said. The first $789,000 was to go to his father to conceal the asset from creditors. His father died in March 2010.

Johnson alleged that Rizzolo for months portrayed himself to Christiansen as having no money, all the while knowing he was due the $2 million.

But Rizzolo's lawyer, Dominic Gentile, contended Rizzolo maintained a close working relationship with his probation officer and did not intentionally mislead him. Christiansen testified under cross-examination from Gentile that he also saw the relationship as cordial, but he added that he still was obligated to enforce violations of Rizzolo's supervised release.

Christiansen said he told Rizzolo to consider him a "silent partner," meaning Rizzolo needed to tell him about all business transactions.

Rizzolo, long suspected of having ties to organized crime, pleaded guilty to a felony tax charge in June 2006 to end a decade-long FBI racketeering investigation. He agreed to pay several million dollars in fines and taxes, along with $10 million in restitution to Kirk Henry, a Kansas City area man paralyzed in 2001 during a fight over a bar tab at the Crazy Horse Too.

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

Henry's attorneys have alleged that Rizzolo is ducking his responsibility to pay Henry and his wife, Amy, the remaining $9 million plus interest that is owed.

They charged that Rizzolo led a wealthy lifestyle after his release from prison, running up $900-plus nightclub and restaurant tabs, maintaining hundreds of thousands of dollars in foreign trusts and dealing only in cash.

The U.S. Marshals Service took control of the Crazy Horse Too, once a hangout for celebrities, politicians and underworld figures, more than three years ago but could not find a buyer in a depressed real estate market.

In February, prosecutors told Pro that the government had given up trying to sell the shut down strip club. Pro then ordered Canico Capital Group, the investment firm that owns the first deed of trust on the property, to hold a public foreclosure sale later this year.

The Crazy Horse Too was said to be worth as much as $35 million when the Marshals Service began entertaining offers. Conservative estimates now set the value of the property, which can no longer be used as an adult nightclub, at roughly $2.5 million.

Contact Jeff German at jgerman@reviewjournal.com or 702-380-8135.