Sunday, Aug. 19, 2007 | 1:16 a.m.
Strip club landlord Rick Rizzolo may be outfoxing the federal government - so far - in crucial elements of his criminal plea deal.
The government says it cannot locate millions of dollars worth of Rizzolo assets that may be needed to satisfy his hefty financial end of the agreement.
Rizzolo pleaded guilty to tax evasion on June 1, 2006, and later was sentenced to 366 days behind bars and ordered to sell the Crazy Horse Too topless club to pay $17 million in court-ordered fines, forfeitures and settlements.
Last week, as Rizzolo sat in federal prison and his efforts to sell the Crazy Horse Too appeared stalled, frustrated federal prosecutors filed papers under seal asking U.S. District Judge Philip M. Pro to allow the U.S. Marshals Service to seize the club should Rizzolo fail to reach an agreement with a buyer.
Pro granted the motion. But to avoid steering the government into the topless club business, he also gave Rizzolo and his lawyer, Mark Hafer, permission to deal with three Crazy Horse Too suitors who passed FBI background checks.
Rizzolo now has a new sale deadline of Sept. 30.
In court papers later unsealed by the judge, it was clear that the government's patience with Rizzolo was being tested.
Prosecutors expressed concerns about their ability to get Rizzolo to meet his financial obligations if he can't sell the Crazy Horse Too, which has been closed since July. They submitted a four-page affidavit from FBI agent Anthony Mace, who investigates organized crime, to make their case for the club's possible seizure.
"I have not been able to find any other personal or real property of significant value to satisfy debts owed to the United States and the victim," Mace wrote.
The victim is Kirk Henry, a Kansas City-area man who was paralyzed following an altercation at the Crazy Horse Too in 2001. A large part of Rizzolo's $17 million government debt, $10 million, is owed to Henry for his life-altering injuries.
Mace referred to a generous divorce settlement Rizzolo struck with his longtime wife, Lisa, in May 2005, about a month after Rizzolo began negotiating his plea agreement with the government.
According to divorce records, the couple said they had become incompatible with no chance at reconciliation.
Rizzolo, nevertheless, was very generous with his wife.
He gave her the couple's 5,763-square-foot home in Canyon Gate, appraised at $944,760, as well as a $1.4 million oceanfront home in Newport Beach, Calif., and a condominium in Chicago that Cook County records say had a market value of $192,638 in 2003.
Rizzolo also handed his wife two Oppenheimer investment accounts that were holding $7.2 million, and he agreed to pay her $5 million in alimony over a five-year period.
Mace said Rizzolo took out a $5 million loan secured with the Crazy Horse Too in October 2005, but the agent has been unable to "track or locate" the cash.
The FBI also could not find any overseas assets belonging to Rizzolo and has not seen seven luxury vehicles registered to Rizzolo at any of the homes belonging to the couple, Mace said.
Beyond the mystery over the whereabouts of Rizzolo's assets, prosecutors last week said they also were concerned that, because of the declining value of the once-lucrative Crazy Horse Too, Rizzolo might not meet his financial responsibilities even if he sells the club.
Hafer added to those concerns by suggesting that Rizzolo needs to make at least $24million to pay off his creditors. That includes the $5 million loan and a $2.2 million fine Las Vegas imposed on the Crazy Horse Too that was reinstated recently by a District Court judge.
Where the club was once worth more than $40 million, the latest offers are $29 million to $34 million, Hafer said.
Although the club's value diminishes by the day, Hafer told the Sun late Friday that he was confident a sale would make both sides happy.
"If we sell the Crazy Horse to one of the three approved buyers, everybody gets paid in full," he said.
Prosecutors said poor management under restaurateur Mike Signorelli, who leased the club from Rizzolo from October 2006 until last month, also hurt its value.
Without naming Signorelli, prosecutors charged that the Crazy Horse Too under Signorelli's stewardship owed Rizzolo $2.5 million in rent, the Internal Revenue Service $595,023 in payroll taxes and the state $386,202 in sales taxes.
Instead of turning over the Crazy Horse Too to the government if a sale can't be closed next month, Hafer wanted Pro to appoint an independent receiver to reopen the club and rebuild its value while new suitors were sought.
Pro, however, denied that request, giving the government some comfort in knowing it may soon have more control over the fate of the Crazy Horse Too - and its ability to ensure that Rizzolo pays his debts.
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