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

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

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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:

Lawrence Frank Kladek, 65 and a resident of Inver Grove Heights, entered his plea after reaching a deal with federal prosecutors.

The club owner was indicted in September on four counts of tax evasion and five counts of filing false tax returns.
 
Kladek also agreed that he owed the government $912,976 in taxes, after using an ATM at the club to funnel money into an account each time a customer made a withdrawl.
 
The money in the account, which was concealed from the IRS, went toward Kladek’s personal purchases and investments.
 
In total, Kladek admitted receiving $1.2 million in unreported income between 2000 and 2004.
 
In his plea agreement, Kladek agreed to helping the IRS recover those losses.  

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 Inver 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 liqour 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.

About Peter Pappas

Peter is a tax attorney and certified public acccountant with over 20 years experience helping taxpayers resolve their IRS and state tax problems.

He has represented thousands of taxpayers who have been experiencing difficulty dealing with the Internal Revenue Service or State tax officials.

He is a member of the American Association of Attorney-Certified Public Accountants, the Florida Bar Association and The Florida Institute of Certified Public Accountants and is admitted to practice before the United States Tax Court, the United States Supreme Court, U.S. District Courts - Middle District of Florida

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  1. […] Also, if a taxpayer has any other state issues licenses or registrations (i.e a liquor license) the IRS will attempt to revoke or terminate the license of the […]