IRS agents go cash only to investigate former owner of Pure

Just a few years ago, Steve Davidovici was flying high as the co-owner of Pure, the Strip's hottest nightclub. Mikel Hasen was a muscular fellow at the door.

Patrons filled long lines and often waited hours to get into Pure. They were so eager to get into their favorite club and pay for wildly overpriced booze and atmosphere that they thrust scads of cash at anyone who might help them get past the velvet rope.

"Stevie D" ran the operation, which attracted Hollywood hotties, top DJs and an ocean of free-spending wannabes. Hasen just worked the door. But each man raked in a bundle of untaxed cash from the Caesars Palace hot spot's seemingly endless river of gratuities.

These days, the action at Pure nightclub has cooled in the wake of an Internal Revenue Service investigation into the flow of cash around the place. On Tuesday morning in U.S. District Judge Kent Dawson's courtroom, the former boss and ex-doorman each pleaded guilty to single counts of filing a false 2006 tax return.

Question is, did the Pure investigation change the management style at clubs?

The answer is mixed, but the consensus is that it's substantially improved accounting practices as the IRS, Metro and even the state Gaming Control Board have taken notice.

For Las Vegas IRS Special Agent in Charge Paul Camacho, the case brought by Department of Justice Tax Division trial attorneys Christopher Maietta and Joseph Rillotta sends a clear signal to the cash-rich club scene.

"Don't underestimate our ability to follow the money," Camacho says.

IRS agents followed the money into the pockets of a variety of Pure personnel from the top down.

As part of his plea agreement, Davidovici admitted under-reporting his income for 2006 by $141,306.

By accepting the plea deal, he is in line for a probable prison term of 12 to 18 months, and he avoids potential charges stemming from 2004 to 2010. Hasen faces a similar sentence for filing a false 2006 tax return.

Davidovici defense attorney David Chesnoff said in a statement that his client had taken full responsibility:

"We are pleased to have reached a settlement with the government. Mr. Davidovici wants to repay his debt and move forward."

If the normally chatty Chesnoff appears uncharacteristically reticent, there's good reason: Davidovici is a moneymaking son-of-a-gun whose business ideas have a way of generating big bucks and capturing the fancy of the fickle masses and the beautiful people alike.

The facts weren't exactly in Davidovici's favor, and taking on the DOJ Tax Division's heavy hitters might have resulted in a much heavier sentence.

Not that Davidovici and Hasen needed a reminder, but Camacho adds, "Just because you're dealing in cash doesn't mean you're invisible to an IRS agent."

Camacho insists the resolution of the tax case so close to April 15 is just a coincidence. But, come to think of it, it does make for a persuasive advertisement.

"With the April 15 tax deadline looming, it is important for people to have confidence that when they pay their taxes, their neighbors and competitors will do the same," he says.

Davidovici will pay a price when he's sentenced on June 27, but it's one he can afford. He hasn't exactly been down on his luck in the wake of the Pure raid. He is a central figure in the development of the highly successful Sugar Factory brand as well as the popular Chateau Nightclub & Gardens at Paris Las Vegas.

Defense attorney Chesnoff reminds skeptics that Davidovici employees hundreds of people and has been a good corporate citizen.

And, these days, I'm guessing all his workers pay their taxes and have April 15 circled on their calendars.

John L. Smith's column appears Sunday, Tuesday, Wednesday and Friday. Email him at Smith@reviewjournal.com or call 702-383-0295. He also blogs at lvrj.com/blogs/smith.