Wednesday, June 18, 2003 | 11:13 a.m.
A battle for control has erupted between the owners of Sapphire, a business in Las Vegas that is billed as the world's largest topless nightclub.
Los Angeles businessman D. Michael Talla, whose company owns 50 percent of both Sapphire and Olympic Garden, filed suit late last week in District Court against Pete Eliades, the other 50 percent owner of the two well-known topless dancing clubs.
Talla accused Eliades of fraud and interfering with his business interests at the clubs and asked District Judge Jennifer Togliatti to modify a Nov. 9, 2001, letter of agreement between the two parties so that Talla's group can take sole ownership of Sapphire and leave the Olympic Garden in the hands of Eliades.
Talla requested an independent receiver be appointed to run both clubs until the judge resolves the matter.
But Mark Tratos, a lawyer for Eliades, said late Tuesday that Talla's claims are false and a "red herring" to divert attention away from allegations that Talla unlawfully failed to disclose hidden partners in the deal from Eliades and local licensing authorities.
"Mr. Eliades has asked some pointed questions about hidden ownership interests that were not revealed," Tratos said.
Tratos said he planned to file a countersuit in the coming days against Talla.
Erika Pike Turner, one of Talla's lawyers who filed the suit against Eliades, declined comment this morning on the hidden partner allegations.
"Because this is in litigation, we're not commenting," Turner said.
But Talla sent a letter to the Clark County Department of Business Licenses on May 14 acknowledging that he failed to inform authorities about six partners who have 5 percent or less interests in SHAC LLC, a Nevada partnership created by Talla and Eliades to run Sapphire and Olympic Garden.
Together, the partners have a total of 11.1 percent of SHAC LLC. They were identified by Talla as Robert Shipp, John Moller, George Vasilakos, Lee Polster, Peter H. Albert and Sheldon P. Berger.
Talla said he has 20.6 percent of the company and his other two previously disclosed partners, Rex A. Licklider and SHAC Feinstein LLC, have 15.6 and 2.7 percent of SHAC LLC respectively. Eliades and his family have the other 50 percent.
In a copy of the letter, obtained by the Las Vegas Sun, Talla described the omission as inadvertent. He said the six partners joined the project late in its development and that, because each of their interests were under 10 percent, he was under the impression that he didn't have to disclose their names until the license came up for annual renewal later this year.
But Ardel Jorgenson, director of the county business licenses department, said this morning that all partners in a topless club operation must be disclosed promptly no matter what their interests. Failure to make a full disclosure can result in the revocation of the club's license, she said.
Jorgenson said her department is investigating the matter and, within a week, will be sending letters to Talla's six undisclosed partners calling them forward for licensing.
She also said investigators will attempt to determine whether Talla has any other hidden partners.
"We are going to take an in-depth look at this," she said.
Jorgenson explained that she hasn't decided yet whether to seek disciplinary proceedings against Talla. That's because Sapphire's license is in the name of the SHAC partnership, which includes both Talla and Eliades. If county officials move to revoke the license, she said, Eliades also would be hurt by that action unless either one of the parties buys out the other's interests.
Talla's suit was filed after buyout negotiations collapsed last week.
Jim DiFiore, manager of the city's Business Service Division, could not be reached for comment this morning on whether the controversy would affect the license of the Olympic Garden, which is in the city.
Sapphire, a 71,000-square-foot complex on the site of the old Sporting House Athletic Club, 3025 S. Industrial Road, opened to much fanfare on Dec. 13. The battle between its partners comes amid FBI investigations at three of its chief competitors, Crazy Horse Too, Cheetahs and Jaguars.
In his 17-page suit, Talla described Eliades' participation in the development and operation of Sapphire as "chaotic" and "counter-productive"
He charged that his partner's interference in "several aspects" of the design process delayed Sapphire's opening for four months and led to $1.5 million in additional construction costs. The delay also cost the partnership another $3.2 million in net profits, the suit said.
Talla also charged that Eliades has failed to give his company its rightful share of the gaming proceeds at Olympic Garden, which amount to roughly $1.2 million a year, and has not provided a full accounting of the topless club's business transactions.
Sapphire does not have any gaming revenue.
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