What Happens in Vegas Stays in Vegas

17477953 - business executive in formal suit giving money as a bribe

The Las Vegas strip is world renown for gambling, shopping, fine dining, entertainment and nightlife, which includes more than 20 strip clubs. The former owner of Crazy Horse Too, a Las Vegas, Nevada strip club, ran out of luck when federal authorities, who had been scrutinizing the man’s business ventures for more than 20 years, finally caught and convicted him of tax fraud. (Apparently, there was a lot more going on in the club besides pole dancing.)

The former club owner, who had ties to the Mob, evaded paying $1.7 million in employment taxes on wages he paid to his floormen, bouncers, bartenders and shift managers more than a decade ago. While he paid these employees in cash, the former club owner failed to provide correct payment records to his bookkeepers. (This caused the bookkeepers to file false employment tax returns with the Internal Revenue Service (IRS), underreporting wages paid and the amount of taxes due.)

He admitted to his bad business conduct more than a decade ago and pleaded guilty to conspiring to defraud the United States. But that was not the end of the story. He then worked hard at concealing his assets and income from the IRS to prevent the tax agency from collecting the delinquent taxes. (The fraudster told the IRS he didn’t have any income or assets or the ability to pay back the taxes he owed.)

As you might guess, he lied about his solvency. The Las Vegas club owner sold another strip club he owned in Philadelphia and directed the $900,000 in proceeds to an offshore bank account in the Cook Islands. He also withdrew $50,000 from a bank account and wrote a check to another person, who then cashed the check and gave the money back to him so he could avoid an IRS levy and seizure of funds. (It sounds like he was busy behind the club stage trying to stuff his money where the feds couldn’t find it.)

The 58-year-old’s deceptive behavior finally caught up with him. He pleaded guilty to tax fraud for attempting to evade and defeat the payment of employment taxes. He was sentenced to two years in prison for evading more than $1.7 million in employment taxes. He must also serve six months of supervised release and pay restitution of more than $2.6 million to the IRS.

Employers are required to withhold and remit taxes from employee paychecks including federal income taxes, Social Security and Medicare taxes. When employers, like today’s fraudster, fail to pay the taxes withheld from employee paychecks, they steal from the government. (I’m sure today’s criminal wishes that what happened in Las Vegas, stayed in Las Vegas, but now the whole world knows.)

Today’s “Fraud of the Day” is based on an article entitled, “Vegas Strip Club Owner Gets 2 Years in Prison for Tax Evasion,” published by Forbes on October 30, 2017.

The former owner of a Las Vegas strip club has been sentenced to 24 months in prison for evading payment of more than $1.7 million in employment taxes. Frederick John Rizzolo, of Las Vegas, the former owner of The Crazy Horse Too, pleaded guilty in June, to attempt to evade and defeat the payment of employment taxes that he owed for 2000 through 2002. According to documents filed with the court, Rizzolo paid The Crazy Horse Too’s floormen, bouncers, bartenders and shift managers in cash, but failed to provide accurate records of these payments to the Club’s bookkeepers. 

Rizzolo caused false employment tax returns to be filed with the IRS, which underreported the wages paid and the taxes that were due. In 2006, Rizzolo admitted this conduct and pleaded guilty to conspiring to defraud the United States. But the case didn’t stop there. Following his guilty plea, Rizzolo took affirmative steps to conceal his assets and income to thwart the IRS from collecting the delinquent taxes that he owed. For example, Rizzolo directed $900,000 that he received from the sale of The Crazy Horse Club, in Philadelphia, to an offshore bank account in the Cook Islands.

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Larry Benson
Larry Benson is currently the Director of Strategic Alliances for Revenue Discovery and Recovery at LexisNexis Risk Solutions. In this role, Benson is responsible for developing partnerships for the tax and revenue and child support enforcement verticals. He focuses on embedded companies that have a need for third-party analytics to enhance their current offerings.