Sunday, May 25, 2003
Copyright © Las Vegas Review-Journal

Strip club probe comes amid building boom

Newest venues remaking industry in megaresort style

Sapphire co-owner Dolores Eliades, 48, leans against one of the three bars at the 5-month-old topless club. Alcohol sales drive revenue at the 40,000-square- foot strip venue. Photo by Craig L. Moran. The VIP room at Sapphire, where customers pay several hundred dollars for strippers, alcohol and cigars. Photo by Craig L. Moran. FBI agents stand watch in front of the Jaguars Gentlemen's Club on Procyon Avenue after a May 14 raid. The FBI conducted the raid in connection with a political corruption probe. REVIEW-JOURNAL FILE PHOTO Olympic Garden co-owner Pete Eliades, 70, relaxes Wednesday at his Las Vegas Boulevard topless club. Eliades is attempting to redefine the local strip club market with his new Sapphire club. Photo by Craig L. Moran. Atlanta strip club owner Steve Kaplan leaves federal court on Aug. 2, 2001, after pleading guilty to one count of racketeering. ASSOCIATED PRESS FILE PHOTO

Dolores Eliades walks about her family's new Sapphire strip club, hawking the $35 million topless bar and nightclub.

The $750,000 entrance is done in an art deco style. A glass stage climbs two stories and features 4,000-pound glass panels. The Sapphire logo is displayed atop a multicolored fiber optic wall.

Eliades and her family are betting their newest offering at the site of the old Las Vegas Sporting House will reinvent the adult entertainment business in much the same way Steve Wynn and Sheldon Adelson broadened the appeal of the city's casino industry.

"The illusion is that it's more upscale. It offers a different atmosphere," says Eliades, whose family also co-owns the Olympic Garden strip club.

Her industry has received daily news coverage since a May 14 FBI raid on Cheetah's and Jaguars, a pair of strip clubs operated by the father-and-son team of Jack and Mike Galardi.

Agents also raided Galardi operations in downtown Las Vegas and the San Diego area as part of a political corruption probe. Investigators are attempting to determine whether political figures in the communities received envelopes of cash from the Galardis to sway government decisions.

The headlines come amid a multimillion-dollar building boom in the local strip club industry that saw Jaguars open in June at 3355 Procyon Ave. Then it was Sapphire's turn in December at 3025 Industrial Road.

A third major club, Treasures, is under construction along the east side of Interstate 15 near the Charleston Boulevard exit. It is being developed by the Davari brothers of Houston and is scheduled for a September opening. All employ casino-style theming.

"I drove by Jaguars one day, and I thought MGM Grand had built a strip club," said Michael Green, a history professor at the Community College of Southern Nevada. "In a sense, the strip clubs are following the upward spiral spatially and financially of the casinos. I don't want to say they are elegant looking, but they are large businesses as opposed to the old hole-in-the-wall places."

The county's biggest clubs generate profit margins of about 35 percent, better than the typical Strip megaresort or neighborhood casino. On a good Friday or Saturday night Sapphire will gross $60,000, Olympic Garden, $50,000.

An estimated 5,000 dancers are registered with Las Vegas police to work at local clubs. Some dancers can earn as much as $1,000 to $2,000 on a busy night or a couple of hundred dollars on slow ones.

Federal and local law enforcement officials are convinced that crimes ranging from prostitution to drug dealing regularly occur at many of the nation's estimated 3,500 strip clubs. Last year, Nevada gaming regulators levied a $25,000 fine against Olympic Garden for violations, including failure to prevent prostitution. The club has 13 video poker machines that are regulated by the state.

"This is not the place for meth, coke, prostitution. I tell them straight up, `If you want to be a prostitute work at a brothel,' " said Pete Eliades, the Greek-born patriarch of the local family that co-owns Sapphire and Olympic Garden.

Las Vegas police routinely send undercover cops into the city's and county's 29 topless and nude clubs. Methamphetamine and cocaine are used by many strippers, while prostitution is a profitable side business for some of the women, police say.

"Most of the places say once we make an arrest of one of their employees they'll fire them," said Lt. Terry Davis, who heads the vice unit for Las Vegas police. "Part of our problem in our community is we certainly send out mixed messages. I think people come to town and they think prostitution is legal in our county."

The adult entertainment industry, which includes porno flicks, adult bookstores, brothels and magazines, as well as strip clubs, is a multibillion-dollar industry nationwide, but it is difficult to determine its impact on the national and local economies.

The State Department of Employment, Training and Rehabilitation is unable to break out statewide totals for strip club employment. Those numbers fall under the heading of personal services, which includes wedding chapels, bail bondsmen and bars. Economist Keith Schwer, who teaches at the University of Las Vegas, said he knows of no study detailing the industry's local economic impact.

Playboy Enterprises has no figures. Neither does the Association of Club Executives, an advocacy group for strip club operators.

The typical tourist spends $1,500 in Las Vegas, according to a 2002 survey by the Las Vegas Convention and Visitors Authority. But the authority doesn't monitor spending at area strip clubs, believing that visitors would not be forthcoming about such expenses.

At Olympic Garden, Cheetah's, Jaguars and Sapphire, women walk about the darkly lit aisles dressed in a variety of themes. There's the school girl, the vampy woman of the night, the biker chick, the surfer gal.

"It's great money," said Daniella, a 39-year-old dancer at Sapphire, who previously worked at Olympic Garden.

She persuaded her friend Luna, a 28-year-old Miamian, to commute to Las Vegas 10 days each month to dance at the new club. Luna was making $1,000 a month as a waitress. Now she earns that much in a few hours of work. "I'm happy," said the native of Spain, who speaks little English.

An unknown percentage of the women working the local strip club scene live in Southern California, Phoenix, Texas and south Florida, traveling what's dubbed "the Southwest Airlines shuttle" to work weekends or when big conventions are in town.

Sapphire employs a staff of 147 employees and 2,300 dancers. The women enter through a back door, show their county work cards to a well-dressed host, who checks a computer screen to be certain the card and employee match. Las Vegas police, who conduct background checks on the dancers, could fine the club if the women are working without the appropriate identification.

Sex, gambling and liquor

An estimated 1,500 people will pay a Saturday night cover charge of as much as $20 a head to enter Sapphire. But it is the strip club's three bars that generate its greatest revenue. A bottle of Budweiser costs $5.50. A magnum of Dom Perignon goes for $625. Cigars cost up to $100 apiece.

Club dancers are independent contractors who pay as much as $105 nightly for the privilege to perform. Strippers can be fired if they earn less than $60 nightly from crotch-grinding lap dances and stage appearances in which women remove their outfits and perform splits and spins about brass poles for a handful of single bills.

A contract spells out the do's and don'ts. The strippers are warned against letting customers touch their nipples, breasts or buttocks or lifting their G-strings to expose their genitals, all prohibited by a Clark County ordinance adopted last year. Sapphire dancers are forbidden from touching guests anywhere below the shoulders or sitting in a customer's lap.

"Las Vegas was built on sex, gambling and liquor," Dolores Eliades said. "In the late '70s and '80s they tried to transition to the family business. Las Vegans sometimes forget what built this city."

Megaresort operators have contributed to the sex industry boom by routinely sending limos carrying their best customers to the city's biggest clubs. The Hard Rock Hotel has had an informal relationship with Club Paradise, which sits across Paradise Avenue. Women from the club have been encouraged to hang out topless at the resort's pool.

"There is an intense competition brewing between the goose that laid the golden egg, which is the major hotel-casinos, and the burgeoning gentlemen's clubs for the obvious reason that they're going after the exact same dollar," said local author Jack Sheehan, who is writing a book about the city's sex industry.

Sheehan is convinced that within two to five years lap dances will become a regular offering within the city's hotel-casinos. The reason: political and casino leaders are losing business and tax revenues as free-spending tourists leave local megaresorts to drop hundreds of thousands of dollars every month at strip clubs.

"I do think that bridge is going to be crossed," Sheehan said.

Nevada Gaming Control Board member Bobby Siller isn't so certain.

"I would be against topless gentlemen's clubs (in casinos) where you have lap dancing and contact," said Siller, a former FBI special agent. "It's the lap dancing and contact that encourages and results in many cases of prostitution."

In recent years, the MGM Grand, Caesars Palace and others have dropped any pretense of appealing to family vacationers. Caesars' Shadow nightclub employs shapely young women who dance behind back-lighted screens. The shadowed dancers wear body gloves so they appear to be naked.

`Crucified by the press'

Ask Angelina Spencer about organized crime's role in the industry and she chuckles. It is a myth generated by the media, said Spencer, a Cleveland strip club owner who is executive director of the Association of Club Executives.

"If there is any mob influence in a gentleman's club, it's probably less than .0001 percent of any club in the nation," Spencer said. "I think it's just a dramatic thing you see on `The Sopranos.' It's just something that gives newspapers and television some ratings."

But ask federal and local law enforcement officials the same question and they say organized crime does play a role in the management of some clubs. They just don't know where. Locally, they have investigated Crazy Horse Too Gentlemen's Club and its owner, Rick Rizzolo. In February, the club was raided as part of an ongoing probe into possible links between the business and organized crime.

In recent years, investigators have attempted to tie Rizzolo to organized crime associates Joey Cusumano and Fred Pascente, both of whom are listed in Nevada's Black Book of people forbidden from entering the state's casinos. Rizzolo lawyer Tony Sgro failed to return a phone message seeking comment last week.

"I think that there are people affiliated with some of the strip clubs that are documented associates of organized crime," said Siller, who was unwilling to name names.

With its heavy reliance on cash, it is easier for some club owners to hide income. On a busy night a club might kick back $20,000 in tens and twenties to cabbies who deliver customers.

"There's a lot of money involved and a lot of potential for fraud for the use of overcharging credit cards," said FBI Special Agent Richard Massey. "It's just easy to manipulate high cash industries, same thing with movie theaters or bars or theme parks or any high cash turnover."

Sapphire's Pete Eliades is reluctant to talk about his partners in the five-month-old club. "Ask me about a week from now," he said in a Wednesday interview.

Clark County records list Sapphire as a 50-50 partnership between the Eliades family and Shac MT, which is composed of Rex Licklinder, David Talla and Peter Feinstein. But the county forms provide no details on any of the three.

Spencer said it's not unusual for strip clubs to have silent partners who wish to remain anonymous.

"If you tell someone you're in this type of business they can be crucified by the press and politicians," she said.

Ownership interests can be masked through elaborate schemes that show just a single player or two. That was the problem federal prosecutors faced in Atlanta's Gold Club racketeering case throughout 2001 and early 2002.

They contended that club owner Steve Kaplan had ties to New York's Gambino crime family, an argument prosecutors failed to prove. Instead, Kaplan was sentenced to 16 months in jail for racketeering and credit card fraud that was perpetrated on Gold Club customers, some of whom were National Basketball Association stars, including then-New York Knicks center Patrick Ewing.

The FBI's Massey, a 20-year agency veteran who heads the Bureau's organized crime unit in Atlanta argues that the Gold Club's arcane web of business arrangements was too complex for jurors to grasp.

"Some of these are pretty complex schemes," Massey said. "You get a juror that the only investment he's done is buy a mutual fund. It's no reflection on him. Hell, I have problems figuring out some of these myself."

The FBI special agent is reluctant to estimate the role of the Mafia in the nation's adult entertainment industry.

"I'm sure there is an involvement of criminal groups in the adult entertainment business," he said. "Obviously criminal groups have some influence on the industry because of the potential profits, but no I don't think it's nationally controlled by any mob group or Mafia group entirely."