Rick's Cabaret parent, executives indicted in New York tax fraud and bribery case

By Jonathan Stempel

NEW YORK, Sept 16 (Reuters) - The parent company of Rick's Cabaret and other strip clubs, as well as five executives, have been indicted over their alleged roles in a 13-year bribery scheme to avoid paying millions of dollars in New York sales taxes, state Attorney General Letitia James said on Tuesday.

RCI Hospitality Holdings RICK.O, officials including Chief Executive Eric Langan, and three of the company's Manhattan clubs together face nearly 80 charges in a New York state court including criminal tax fraud, bribery and conspiracy.

The defendants "deny the allegations and will take all necessary action to defend themselves against these overreaching charges," their lawyer Daniel Horowitz said in a statement. "As a publicly traded and audited company, RCI has a policy of paying all legitimate and non-contested taxes."

Shares of Houston-based RCI tumbled after the indictment was announced, and closed down $5.46, or 15.9%, at $28.79. They fell to $26.26 in after-hours trading.

James said that between September 2010 and January 2024, RCI and its executives bribed a former auditor with New York's Department of Taxation and Finance to obtain favorable treatment in six audits.

She said this enabled RCI to avoid more than $8 million of state and city sales tax on "Dance Dollars," an in-house currency that clubs sold to customers for various services, including private dances.

The auditor, whose name is redacted from the indictment, allegedly received at least 13 complimentary trips to RCI-owned strip clubs in the Miami area, including up to several thousand dollars per day of private dances.

Manhattan clubs charged in the indictment include Rick's Cabaret, Vivid Cabaret and Hoops Cabaret and Sports Bar.

One defendant, RCI controller Timothy Winata, allegedly delivered the bribes. The indictment included dozens of emails and text messages allegedly related to the scheme.

"Wow. Tim is clutch," RCI Chief Financial Officer Bradley Chhay, who is also a defendant, allegedly texted Langan on September 1, 2023. "Tim got the guy to $47k in vivid New York. But owes him a couple trips."

Nineteen days later, Chhay agreed to settle an audit of Vivid Cabaret for $47,343, the indictment said.

James said a sixth person was also indicted but has not been arraigned.

Langan and Winata each face a top charge of first-degree criminal tax fraud, which carries a maximum 25-year prison term. Chhay's top charge of second-degree bribery carries a maximum 15-year prison term.