In Las Vegas, the IRS Is Up in Da' Club

Feb. 28, 2008 — -- The biggest buzz on the Strip these days has nothing to do with Paris or Lindsay or Britney.

The feds are grabbing the night-life headlines in Las Vegas, and we're not talking K-Fed.

The Internal Revenue Service is up in da' club!

"There is definitely some general nervousness now," said Bryan Bass, who teaches nightclub management courses at the University of Nevada, Las Vegas.

"It is a cash-driven city and any time the IRS gets involved, people … are going to get nervous."

The government continues to play it close to the vest after raiding the offices of the Pure Management Group, a marquee night-life business enterprise. Some observers suspect that authorities may have their sights set on the possibility that employees are making side deals with patrons for club access.

In an early morning raid last week, investigators carted off more than 16 boxes of material, including laptop computers, from PMG headquarters in Las Vegas. Federal agents also spent hours at LAX and Pure, two of the company's most successful clubs.

Dianna Nielsen, an IRS spokeswoman, confirmed agents were inside the nightclub empire's headquarters, but would not say why. "We are not able to confirm or deny any investigation at this point," she said

The Pure Management Group is also being tight-lipped but released a statement acknowledging the raid. "Pure Management Group is fully cooperating with this IRS investigation and looks forward to a quick and satisfactory resolution."

Local columnist Norm Clarke has been observing the Vegas nightclub scene for years and has witnessed its astonishing transformation into a world-class entertainment industry pulling in hundreds of millions of dollars.

The business opportunities with Vegas nightclub companies like PMG or the Light Group have attracted corporate and celebrity investors including Shaquille O'Neal, Celine Dion and Andre Agassi, although there is no indication that any celebrities have been targeted by the IRS.

A-, B- and C-list celebrity sightings are as much a part of the popular club landscape in Las Vegas as apple martinis.

The city draws more than 39 million visitors a year; many of the hot nightspots feature long lines to get in and anxious patrons willing to pay just about anything to move to the head of that line to get that party started.

The Vegas columnist claims to have a network of "informants" in the clubs who have been telling him about the creative ways club employees can increase revenue for the clubs, while skimming a nice bit of unreported cash for themselves.

"I hear that some clubs even have placed a shoeshine guy or someone in the men's room to stamp guys for the VIP for a couple of hundred dollars. They have all these side games."

The Web site lasvegasmagazine.com is reporting that IRS agents also raided the home of at least one member of the Pure management staff.

"They are convinced that the outside-the-club tipping policy has involved kickbacks of some descriptions," the Web site reports.

But the University of Nevada's Bass says his dealings with the big companies suggest these shakedowns are not the norm.

"The nightclub business always has been and always will be a cash business, and when you are dealing with such large amounts of money, individuals with a lower set of standards are going to do some shady things."

Should the club owners and investors be worried about a crackdown?