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Vegas Strip Clubs Targeted in Operation G String

LAS VEGAS – FBI agents burst into Jaguars – an upscale “gentleman’s club” a couple of blocks off the Strip – just as the shift was changing in the early afternoon and the strippers were in their dressing room getting ready for the next performance.

Hearing the commotion outside his office and fearing a fight had broken out in the lounge, the club manager jumped to his feet, threw open the door – and found two agents pointing guns at him.

“They had this battering ram and started battering the liquor room door,” said the manager, who identified himself only as Joe C. “Initially, I was in shock.”

The dramatic raid in mid-May was the first public confirmation of a sweeping corruption investigation, dubbed Operation G-String, that has roiled the nation’s gambling capital and shined a spotlight on the city’s booming, fast-growing strip-club industry.

A 42-page federal indictment unveiled last month accuses four current and former Clark County elected officials of accepting up to a total of $400,000 in bribes from Michael Galardi, a high-profile strip-club owner.

Galardi, 42, who along with his father owns a string of strip clubs across the country, has pleaded guilty to one count of racketeering and is cooperating with the government. His attorney declined to make Galardi available for comment.

The purpose of the bribes, according to the indictment, was to crush Galardi’s rivals in the competitive strip-club industry that has proliferated just out of sight of the Strip’s world-famous hotels. Galardi also wanted to defeat new rules designed to crack down on illicit sexual activities in the clubs, prosecutors say in court papers.

Much of the evidence against Galardi and the others comes from phone conversations the government was listening in on, records show.

Copies of phone excerpts released by U.S. Atty. Daniel G. Bogden show that the Clark County commissioners were asking the strip-club owners to fund everything from upcoming election campaigns to tuition for an Olympic ski school.

One former commissioner (a commissioner is like a county supervisor in California) was overheard boasting to a Galardi associate that he was doing “my duty to God and country” by helping out the strip-club owner, the indictment said.

The same commissioner, Erin Kenny, told the Galardi associate just before the 2002 November election that she was desperate for money, court papers show. “Tell me what I’ve got to do, but I’ve got to have money from him,” Kenny said. “… I’m on my knees begging.”

The prosecutions resulted from a joint investigation by the FBI, the Las Vegas Metropolitan Police Department and the Internal Revenue Service. Bogden’s office, along with attorneys from the Department of Justice’s organized crime and racketeering section, is prosecuting the case.

Some of the government’s tactics are being criticized as going too far. One target is the alleged use of the Patriot Act – passed in the wake of Sept. 11 to combat terrorism – to quickly obtain financial records of investigation targets.

“I didn’t vote for the Patriot Act to allow the FBI to go after strip-club owners,” Rep. Shelley Berkley (D-Nev.) said in an interview.

The scandal, with its bizarre twists and turns, has replaced the tiger-mauling of Roy Horn as the hot topic of gossip around the craps tables on the Strip. Longtime Vegas watchers say Operation G-String is probably the biggest scandal to hit the city since the early 1980s.

“The last time we had anything approaching this was Operation Yobo in 1982,” said Guy Rocha, Nevada’s state archivist. Several state legislators went to prison for accepting bribes from an undercover FBI agent posing as a land developer.

Those accused in the latest scandal – Kenny; former commissioners Dario Herrera and Lance Malone; and current Commissioner Mary Kincaid-Chauncey – don’t have the same political wattage attached to their names as those caught in Operation Yobo, Rocha said. But they had a bright future.

“These were some of the fair-haired boys and girls of the Democratic Party,” Rocha said.

Kenny, 42, ran for lieutenant governor in 2002. Herrera, 30, had made a run at Congress and was considered an articulate leader-in-waiting of the fast-growing Latino community in Nevada. Kincaid-Chauncey is a 65-year-old grandmother respected for her work with foster children.

Herrera, Malone and Kincaid-Chauncey have pleaded innocent. Kenny pleaded guilty to three counts of wire fraud and conspiracy. Like Galardi, she is cooperating with the government. Also like Galardi, she faces a 20-year prison sentence on the most serious charge.

Lawyers for those indicted declined to make their clients available for comment.

As part of his guilty plea to racketeering, Galardi has agreed to forfeit $3.85 million and give up his interest in the clubs. He also awaits sentencing after pleading guilty to attempting to bribe three San Diego city councilmen in connection with his club in that city.

A spokesman for the FBI, Todd Palmer, confirmed the inquiry was continuing. However, he refused to comment on reports in the local media that future targets include developers fueling the city’s fast-growing housing market. In recent years, massive tracts of stucco homes have marched almost to the foot of the Spring Mountains west of the city.

The attempted crackdown on the strip clubs began after police paid a visit to Commissioner Yvonne Atkinson-Gates, the wife of a judge.

She was astonished, she said, to hear about the blatant sexual acts taking place in some of the clubs under the guise of lap dancing. A lap dance is a private performance by a stripper, usually starting at $20 a dance. Police said the activities went way beyond dancing.

“It was really, really bad,” Atkinson-Gates said in an interview. She introduced a resolution last year to prevent any touching between the dancer and the customer. She wasn’t prepared for the response. “I took so much abuse,” she said. “The industry came after me.”

There are an estimated 20 strip clubs in Clark County, a threefold increase in the last five years. Their rapid proliferation is another indicator that Las Vegas is returning to its “Sin City” roots after its public relations attempt in the 1990s to make the gambling mecca more family-friendly.

They range from the small and humble, with tiny stages and bad sound systems, to the extravagantly cushy, with valet parking, big-screen televisions and VIP skyboxes for lap dancers and well-heeled clients. One new club covers 75,000 square feet and is packed every night.

Pete Eliades, who has an interest in two clubs, the Olympic Garden and Sapphire, said a club could bring in anywhere from $5,000 to more than $50,000 a night.

Eliades said Galardi “was doing good” with his clubs. He just got greedy, Eliades said. “He was trying to corner the market,” Eliades said.

The indictment says that, beginning as early as 1999 and continuing until March of this year, Galardi gave tens of thousands of dollars to the commissioners.

Defeating the no-touch rule was just part of his agenda, according to the documents. He also asked the commissioners to grant favors to his clubs and to harass his competitors and delay their permits, the documents say.

The indictment portrays Galardi, a husky man of average height who slicks back his dark hair, as a hard-nosed businessman at times, fuming about how little he was getting for his alleged payoffs. At other times, he appears more like a doting rich uncle, ministering to the needs of those close to him.

Besides giving Kincaid-Chauncey $4,000 for her grandson’s ski school tuition, Galardi helped fund Kenny’s failed run for lieutenant governor, according to the indictment.

If Kenny came through for him on an upcoming vote, he would “take her to a local automobile dealership and buy her a Denali” pickup, he said, according to court records.

Malone, a former policeman who went to work for Galardi after losing his seat on the commission, is quoted telling the strip-club owner last year: “You’ve had Dario from the very beginning…. I mean, dude … that’s your person. Erin’s your person…. Mary’s your person.”

The FBI and U.S. attorney’s office refused to comment, but news reports, comments from defense attorneys and local legal experts indicate some of the conversations were picked up by agents listening in on a suspect vehicle’s emergency roadside communication system.

Realizing the navigation and communications system could be turned into a remote listening device, the FBI asked the federal district court in Nevada to require the company that markets the On Star-type system to help them intercept conversations in the vehicle.

This was done by putting the car into stolen vehicle recovery mode, which opens up a communication line to the car so that anyone monitoring the system can hear what’s going on in the car without occupants knowing it. After first complying, the company resisted.

The court overruled the company’s objections, and the company appealed. Last month, the firm won a ruling from the U.S. 9th Circuit Court of Appeals holding that the lower court judge who allowed the eavesdropping was wrong.

“[T]he FBI, however well-intentioned, is not in the business of providing emergency road services,” the court said.

Dominic Gentile, Malone’s attorney, said, “I’m sure we will” try to have the eavesdropped conversations thrown out.

Rep. Berkley has also written a letter to Atty. Gen. John Ashcroft protesting the misuse, in her eyes, of the Patriot Act. “In my opinion the use of the Patriot Act in this context violates both the spirit and intent of this important legislation,” Berkley wrote.

A spokesman for the Justice Department refused to confirm that Patriot Act provisions were used in the Las Vegas case. However, the spokesman, Mark Corallo, said the money-laundering provisions in the Patriot Act could be used in criminal cases.

Those provisions were proposed by Sen. Paul S. Sarbanes (D-Md.). “He never meant it to be used solely for terrorism,” Corallo said.

The FBI’s Palmer refused to comment on the tactics – including springtime raids on several strip clubs – the government has used in the Las Vegas case.

However, the public has greeted the federal raids without resentment or anger – another indicator of how much Las Vegas has changed in recent years, some say.

“I moved here in 1991,” said Charles Kelly, a former federal prosecutor who is in private practice. “When I came, the feds were ill-regarded in this town.”

Local juries acquitted more than one high-profile defendant despite strong evidence, he said. This time, there has been little of the old resentment toward the feds, according to Kelly.

The huge influx of people from other parts of the country in the last 15 years has changed the character of the town. “Las Vegas is turning into California,” Kelly said.


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