After three years of failed efforts by the government to sell the Crazy Horse Too, the once-notorious strip club is now headed for a court-ordered public sale to help pay off its former owner's debts.
U.S. District Judge Philip Pro on Wednesday issued an order giving the U.S. Marshals Service a May 3 deadline to sell the closed club, once a hangout for movie stars, politicians and mobsters, "by any lawful means, including public auction."
Proceeds from the sale are supposed to go toward paying off the millions of dollars its convicted former owner, Rick Rizzolo, owes the government in back taxes and fines, as well as a $10 million legal settlement for a Kansas man, Kirk Henry, who was paralyzed in a fight over his bar tab at the club in 2001.
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 that often attracted headlines about the already world-famous club.
He served a year in federal prison.
Under his plea agreement with the government, Rizzolo had a year to sell the club, but when he couldn't sell it, the Marshals Service took control of the property and for three years tried to unload it in a declining real estate market.
The club anchors a small business mall on Industrial Road just North of Sahara Avenue near Interstate 15.
Once valued at an estimated $35 million, the club now might be worth no more than $5 million.
In addition to the real estate slump, the value has fallen because the Marshals Service allowed the club's liquor and adult entertainment licenses to lapse. Under current zoning laws, that lapse prevents the club's future use as an adult nightclub.
"It was total mismanagement and incompetency," Rizzolo's lawyer, Dominic Gentile, said. "There was absolutely no good reason for the government not to find an operator who could keep the club alive until it was sold."
Gentile said that Rizzolo has been "damaged beyond repair by the government" and that his financial future now is bleak.
But Gentile added that the Henrys have been harmed even more.
"The Henrys are the biggest victims here," he said. "They should have had their money a long time ago."
The couple, who are suing Rizzolo in federal court and alleging fraud, probably will have to go after him personally to get the cash settlement, which with interest is now more than $12 million. Lawyers for the Henrys could not be reached for comment.
In his order, Pro said, "The time has come" to dispose of the Crazy Horse Too property for whatever it will bring.
"There does not appear to be a reasonable likelihood the United States will be able to sell the property through a negotiated sale in the foreseeable future," Pro wrote.
Pro ordered the government and all parties with an interest in the property to file a joint statement by Jan. 24 outlining how they want to proceed with the public sale.
Natalie Collins, a spokeswoman for the U.S. attorney's office declined immediate comment on Wednesday, saying, "We have not had a chance to review the order yet."
Contact Jeff German at email@example.com or 702-380-8135 or read more courts coverage at lvlegalnews.com.