Friday, June 11, 2004
Copyright © Las Vegas Review-Journal

LAS VEGAS TOPLESS CLUB: Treasures' owners face Texas tangle

$2.17 million seized in federal money-laundering probe

The owners of the topless club Treasures, already on thin ice with Las Vegas officials over what's described as a culture of lawlessness in their club, are the subject of a federal money-laundering investigation in Houston.

Ali and Hassan Davari, who own six adult clubs in the Houston area, had $2.17 million seized by Harris County officials late last month in connection with an investigation into whether the Davaris skirted federal cash-reporting requirements.

The state of Texas last week filed a civil lawsuit against the Davaris related to their banking activity.

"We were able, through bank records, to trace at least that much ($2.17 million) as being involved in money laundering and structuring offenses," Harris County Assistant District Attorney Karen Morris said Thursday. Morris carried out the seizure on Davari accounts at three banks.

The Department of Homeland Security and other federal agencies are conducting the investigation. No criminal charges have been filed.

Word of the federal probe and civil lawsuit comes as the Davaris seek Las Vegas City Council approval of a permanent liquor license for their opulent $30 million club near Sahara Avenue and Interstate 15.

During Treasures' first six months in business, authorities found what they called an accelerating "culture of lawlessness" illustrated by rising numbers of violations and citations. Officers issued the club's dancers numerous citations for dance-code violations and, more significantly, four citations for soliciting prostitution.

When they were awarded a six-month temporary liquor license for Treasures, the Davaris vowed to surrender the license without a fight if the club's dancers were convicted of sexual misconduct.

The City Council is scheduled to vote on a permanent liquor license Wednesday. But several city officials said the council probably will postpone its decision because the prostitution cases are unresolved and the money-laundering probe needs to be evaluated.

City officials said it's too early to weigh the effect the federal investigation might have on the Davaris' suitability to hold a liquor license. However, several said it merits watching.

"There's a seizure and an allegation. Obviously, it's something Metro needs to look into," city Finance Director Mark Vincent said. "This speaks to their suitability for licensing."

Councilman Gary Reese said it's important to remember that the brothers have not been convicted.

"I would hate to think they would be doing that here," Reese said of the allegations of money laundering. "It definitely has an effect if it's true. But it's easy to have anybody accused."

Mayor Oscar Goodman and Councilman Michael Mack have abstained from voting on the matter. Mack is a public relations consultant for Treasures, and Goodman's son, attorney Ross Goodman, is counsel for the club on criminal matters.

The City Council granted Treasures a temporary liquor license in 2001 only after the club's representatives promised to maintain a higher standard than that of other erotic dancing establishments.

The promise addressed the council's concern that out-of-state clubs owned by the Davaris were plagued by multiple citations for prostitution, lewdness and drug use. The Davaris' attorney, Mark Fiorentino, promised that the club would "raise the bar" on compliance with the law.

Paul Nugent, the Houston attorney for the Davaris, said Thursday that the civil lawsuit against his clients should have no bearing on the Las Vegas liquor license.

"They're very conservative businessmen," Nugent said. "Every dollar earned has been accounted for. Every dollar expended has been accounted for. We are confident when all the facts are known that the Davaris will win this civil suit."

Houston attorney Douglas McNabb, who specializes in federal criminal cases, said the seizure might signal that more serious charges against the Davaris are forthcoming.

"I can tell you if it's $2 million that they've seized, this is very serious and they believe this $2 million is the proceeds of illegal activity," he said.

Officials in Houston claim that the Davaris have employed a technique known as structuring to launder funds from their strip clubs.

The Davaris made hundreds of deposits and withdrawals on bank accounts in amounts slightly under $10,000, officials allege. The IRS requires that transactions above $10,000 be reported.

Bank officers became suspicious and contacted authorities when they noticed that representatives of a Davari club in Houston had cashed checks for $9,000 on a daily basis, according to an affidavit.

Between June 2002 and February 2004, the Davaris cashed 385 checks, all for slightly less than $10,000, according to the affidavit. Hundreds of the checks were for exactly $9,500.

Officials allege that using the structuring scheme, the Davaris would make withdrawals below $10,000 from several accounts when they needed more than $10,000. The Davaris made $2.5 million in structured withdrawals between September and February, according to the affidavit.