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Town Full of Strip Clubs Can’t Pay Its Bills; seeks bankruptcy protection

WASHINGTON PARK, Ill. — This decaying southwestern Illinois village best known for its strip clubs has filed for bankruptcy protection for the second time in five years under the weight of mounting debt and the embezzlement of more than $440,000 by two village workers.

The St. Clair County community of roughly 5,300 people filed for Chapter 9 protection last month, citing assets of less than $50,000 and debt of more than $1 million.

Chapter 9, which allows governmental units to restructure, is so rarely used that of the 1.2 million bankruptcy cases filed in U.S. courts over the year ending March 31, only seven were Chapter 9, according to Karen Redmond, spokeswoman for the Administrative Office of the U.S. Courts.

One notable recent case was 120,000-resident Vallejo, Calif., which filed last year after failing to overcome a $16 million deficit amid shrinking revenue and escalating labor costs for police and firefighters.

Alabama’s Jefferson County – with 640,000 residents, the state’s most populous county – is on the brink of filing the nation’s largest municipal bankruptcy, and Detroit’s public school system also is considering the option.

Washington Park, with a median household income roughly half the national average at just $21,132 as of the 2000 Census, made a similar filing in 2004, claiming a $1.6 million debt. But that case was dismissed because the village emerged from insolvency, albeit only briefly.

The village now says its two largest creditors are the Illinois Department of Employment Security, which is owed $448,793.29, and John “Chico” Matt, the village’s former public safety chief, who is owed $300,000. In 2000, Matt won a court award of $165,000 for emotional distress and humiliation, which a judge said was caused by village trustees who tried to fire him, the Belleville News-Democrat reported.

Washington Park – home to nine strip clubs and pothole-dotted streets – also owes trash haulers, the police pension fund and even one of its topless nightclubs.

“Creditors and lawsuits have been steadily coming after us,” Mayor John Thornton told the Belleville newspaper. “We didn’t have enough money to meet our payroll and pay everybody else. We had no choice but to file for bankruptcy. We are even looking at some layoffs. Things are just that bad.”

Thornton did not immediately return phone messages left Monday by The Associated Press at his home and the village hall.

At a beauty supply shop two doors from the charred remains of a strip club, owner Young Song called news of the village’s financial mess “so terrible.” But he says it’s partly understandable, noting that business at his store has slid 40 percent in recent years as the recession further squeezes the village, where 45 percent of people live below the poverty line, according to the 2000 Census.

Thefts from the village’s coffers haven’t helped.

Linda Connor, a former mayoral aide, faces up to 13 years in prison when sentenced Aug. 28 for evading income taxes and misapplying village property, the latter valued at more than $300,000 and blamed for the underfunding of employees’ pension funds. The bankruptcy filing shows that the village still owes the Illinois Municipal Retirement Fund $26,346.50.

In March, former payroll clerk Dorothy Triplett was sentenced to 18 months in prison for stealing nearly $144,000 from the village in 2006 and 2007. A judge has ordered her to repay the money.

The charges followed a March 2008 raid of the village hall by federal agents, who hauled off 63 boxes of records.

In October 2006, a woman was sentenced to nearly three years in federal prison and ordered to repay the more than $170,000 she pilfered from the village to cover personal expenses for herself and others. Takisha Walker admitted she obtained Washington Park’s bank name and account routing numbers from a campaign flier left at her home in 2002.

That scam was aided by a lack of oversight at the village hall, where no one questioned the multiple payments made electronically month after month, even though the village didn’t pay any of its bills by electronically transferring funds.

In 2006, Washington Park’s revenue stream took a financial hit when a federal judge invalidated the village’s strip club licensing practices after one operator claimed he was unfairly denied a permit and that the annual $30,000 fee unconstitutionally crimped his free speech. Thornton says the village now charges $1,200 for a license and owes $80,000 to that plaintiff in legal fees.

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