By Paul Shukovsky, Kathy Mulady and Scott Gutierrez
The Seattle Post-Intelligencer
SEATTLE — Police and federal agents appear poised to topple the empire of Seattle strip club magnate Frank Colacurcio Sr., alleging that it’s built “on the backs of women” who turn to prostitution to pay the exorbitant fees required to dance in his clubs.
“For far too long, the Colacurcio organization has made big money operating their clubs as fronts for prostitution,” U.S. Attorney Jeff Sullivan said in a statement Monday. “The Colacurcios have designed the clubs, the payment methods and the policies to encourage prostitution and to ensure they’re the ones getting rich off of these illegal sex acts.”
No charges have been filed so far, but likely charges include racketeering, money laundering and fraud, federal prosecutors said.
Armed with search warrants, agents from the FBI and Internal Revenue Service criminal division on Monday raided four strip clubs operated by the Colacurcio family in the Seattle area -- Rick’s on Lake City Way Northeast, Sugar’s on Aurora Avenue North in Shoreline, Honey’s in Everett and Fox’s in Tacoma. They also raided Talents West on Lake City Way, a Colacurcio-owned business that places strippers in his clubs, and 90-year-old Frank Colacurcio Sr.'s home in Lake Forest Park.
The investigation -- which involved the use of undercover officers, confidential informants and unspecified surveillance techniques -- is focused on allegations that the clubs are thinly veiled fronts for prostitution where the house takes a cut of the action. Named as suspects in a lengthy search warrant affidavit are Colacurcio and his son, Frank Colacurcio Jr., along with several associates of the family.
On Monday one of the Colacurcios’ lawyers, John Wolfe, said: “It’s significant that there were no arrests and no charges. This is part of an investigatory process.”
Wolfe said he hasn’t had a lengthy conversation with his clients since the raid and doesn’t have much information yet beyond the affidavit.
“These guys have been investigated every decade,” Wolfe said.
A federal judge issued a temporary restraining order Monday against Rick’s, Sugar’s, Honey’s and Talents West, a move aimed at ensuring that the equity and assets of the Colacurcio organization are frozen and available for forfeiture to the government pending a successful criminal prosecution, authorities said. The order prohibits the Colacurcios and their associates from selling the clubs or doing anything to lessen their value.
A restraining order being issued prior to charges being filed is rare, Sullivan said, reflecting a concern that the Colacurcios might have tried to liquidate their assets once they learned of the investigation.
The order does not close the clubs and the Colacurcios have 10 days to challenge it.
Prodigious amounts of cash flow through the clubs. Bank records examined by IRS and FBI agents show that the four Seattle-area clubs generated $15.2 million from January 2006 through April 2007.
A sexually explicit search warrant affidavit filling more than 100 pages paints a picture of rampant prostitution in the Seattle-area clubs.
“Undercover officers posing as customers at the clubs have documented scores of prostitution violations,” the affidavit states. Some of the women dancing at the clubs charged $40 and up for sex acts -- including intercourse -- that unfold in dimly lit “VIP” sections, according to the affidavit.
Undercover officers, in addition to observing sex acts, said dancers offered to perform sex acts on them for money 70 times at Rick’s alone, over an unspecified period. Although the affidavit says the officers did not engage in sex, it reports numerous instances where naked dancers rubbed their bodies against the officers or touched them outside their clothes.
One female undercover Seattle police officer even worked as a manager at Rick’s, according to the affidavit.
It wasn’t just the officers who reported witnessing sex acts. Several current and former dancers provided information to investigators -- some for money, others to avoid prosecution on prostitution or drug charges. Two former dancers, one of whom apparently objected to the increased prevalence of prostitution, provided information without compensation.
The affidavit portrays the system set up by the Colacurcio organization as pressuring the women into becoming indentured sex workers in which the only way they can pay their “rent” for dancing at the clubs is by committing sex acts. Dancers at Rick’s, for example, must pay $130 per shift. If they miss a scheduled shift or don’t make enough money in an evening to pay their rent, they owe “back rent.”
Men who want “private dances” buy tokens from special club ATMs that charge them a $4 fee for the transaction. The men pay dancers with tokens, who in turn cash the tokens in with the club manager, who subtracts a 10 percent fee, according to the affidavit. Through this system, the club takes a cut of every dance or sex act that happens on the premises.
A Rick’s dancer identified as Champagne “expressed disgust” to an undercover officer over having to commit a sex act with a customer “because she owed back rent,” according to the affidavit.
On Monday afternoon, Honey’s employees -- mostly women in their 20s -- gathered in a vacant lot across the street from the south Everett club, wondering if the federal raid meant they were out of jobs. They said the clubs employ hundreds of people, including waitresses, doormen, security workers and DJs.
One young woman said it didn’t matter that agents weren’t shutting down the clubs.
“No customers are going to come in; it’s been on the news all day,” she said.
That was true early Monday night at Rick’s, where there was one dancer in evidence but not a single customer.
At Sugar’s, federal agents picked through a Dumpster as a tow truck hauled away a Lincoln Town Car owned by Gil Conte, co-owner of the club and Colacurcio Sr.'s driver.
Seattle Police Chief Gil Kerlikowske -- whose officers were the core of the undercover effort -- characterized the Colacurcio organization as one that “made its money on the backs of women.” He called the investigation “the most significant organized crime investigation we have ever undertaken.”
The federal affidavit takes pains to show that club management not only knew of the prostitution taking place, but also promoted it. It relates the story of one dancer who said that Colacurcio Sr. told her that the VIP booths were installed so the dancers could perform oral sex and that the number of customers at Rick’s has increased substantially since the booths were put in.
The situation at Rick’s is in sharp contrast to Déjà Vu, a dance club just a mile down Lake City Way Northeast. Undercover officers repeatedly visited, but could find no dancers willing to take money for sex.
Unlike Rick’s, Déjà Vu has no VIP area and no condom machines in the bathroom, the affidavit says.
It also doesn’t make nearly as much money. Gross revenues at Rick’s for 2006 and 2007 were $10.3 million compared with nearly $3.2 million for the same period at Déjà Vu.
The investigation is also “about tax dollars due the city of Seattle that have never been paid,” Kerlikowske said.
The city levies an admission tax on strip clubs at the rate of 5 percent of door cover charges. Rick’s -- the only club within the city limits -- is believed to be evading the tax by undercounting customers, authorities said. The affidavit estimates monthly tax losses to the city of more than $3,000 based on surveillance of Rick’s door by a surreptitious camera mounted on a utility pole.
In July 2006, while Rick’s reported 7,929 customers, the camera recorded 13,979 for a tax loss of $3,025, the affidavit said.
Controversy and the law have dogged the Colacurcio family for decades. Both Colacurcio Sr. and Colacurcio Jr. have served prison time for tax evasion.
Colacurcio Sr. was convicted of racketeering in 1971, although both men deny prior allegations against them.
In January, Colacurcio Sr. pleaded guilty to making illegal campaign contributions in 2003 in what became known as the “Strippergate” scandal.
Colacurcio Jr., who now owns and manages the multistate strip club business, also pleaded guilty to charges that the Colacurcios secretly channeled illegal donations totaling at least $39,000 to Seattle City Council candidates Judy Nicastro, Heidi Wills and Jim Compton in 2003.
The donations were made by Colacurcio, his relatives, friends and business associates. The donors were then secretly reimbursed for their contributions.
Prosecutors said it was political money laundering to win approval of a zoning change for a parking-lot expansion at Rick’s.
The three council members returned the contributions after they became public. The fallout contributed to the 2003 election defeat of Nicastro and Wills. Compton was re-elected.
When Strippergate broke, Tim Burgess, who served 12 years on the city’s Ethics and Elections Commission, and is now a city councilman, called it “just the tip of the iceberg.”
“It was never about parking spaces and nude dancing,” he said Monday. “Some will suggest (the raids) are a misuse of police resources and making a mountain out of a molehill. Nothing could be further from the truth.
“The strip club industry in this country has a pattern of public corruption, money laundering, coercive violence and prostitution, and that is true in Western Washington as well. It isn’t about nude dancing and free expression, that is total bunk. It is a criminal enterprise that has been operating in our region for decades.”
Copyright 2008 The Seattle Post-Intelligencer