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Warning to Bar/Restaurant Owners: Failure to Pay Sales Taxes Can Result in Loss of Liquor License

The Minnesota Sun reports that the owner of the King of Diamonds strip club in Inver Grove Heights pleaded guilty in federal court to one count of filing a false income tax return Thursday, Dec. 11.

According to information from the U.S. Department of Justice, 65 year old Lawrence Frank Kladek, enter his guilty plea after striking a plea deal with prosecutors.

The club owner was indicted in September on four counts of tax evasion and five counts of filing false tax returns.

Kladek owes the IRS close to one million dollars after using an ATM at his strip club to siphon money into a special account each time a customer made an ATM withdrawal.

Kladek used the money to make investments and pay personal bills. He admitted receiving $1.2 million in unreported income between 2000 and 2004.

According to the Sun, the deal was structured in such a way to allow Kladek to keep his liquor license:

The deal included postponing Kladek’s initial hearing to Dec. 11, to ensure that the Inner Grove Heights City Council approved the strip club’s liquor license Dec. 8.

The city indicated that it would revoke the license if Kladek were federally convicted, which federal prosecutors said could harm his ability to repay the government.

U.S. District Court Judge Patrick Schiltz will sentence Kladek at a later date. The maximum penalty for the crime is three years imprisonment.

Warning to Liquor License Holders:

Read the terms of your liquor license very carefully. All states impose conditions that require the licensee to comply with state and federal tax laws. The commission of a felony usually results in a forfeiture of the license.

A Case in Point:

We recently represented a Florida liquor licensee in connection with a criminal charge of Theft of State Funds in Excess of $100,000 for failure to remit the sales taxes he collected from his sports bar patrons. This is a first degree felony and, if he were adjudicated guilty of this crime, he would have lost his liquor licenses and, therefore, his ability to make a living.

We had the taxpayer amend all of his tax returns and make voluntary restitution of the additional tax owed. Then we arranged a plea with the State of Florida to the lesser included offense of Theft of State Funds Less than $20,000, a third degree felony. Because our client had made efforts to rectify the situation, the Judge agreed to withhold adjudication of guilt to allow our client to keep his liquor licenses.

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