Friday, Oct. 31, 2008 | 10:38 a.m.
In an about face, the U.S. Marshals Service says it now wants to apply for an exotic dance permit and liquor license from the city to operate the Crazy Horse Too.
The change in attitude comes as the value of the Crazy Horse Too has plummeted by millions of dollars since the Marshals Service allowed the liquor license to lapse June 30 without finding a buyer to run the topless club.
At the time, U.S. District Judge Philip Pro criticized the Marshals Service for not applying for a liquor license to take over the club in the absence of a buyer to retain the value of the property. The Marshals Service said at the time it did not want to get into the topless club business.
The strategy to run the Crazy Horse Too also comes as a California Bank has filed court papers asking Pro to lift a stay prohibiting the bank from foreclosing on the government-seized strip club to satisfy a $5 million loan it made to former owner Rick Rizzolo.
Security Pacific Bank told Pro the value of the Crazy Horse Too declined from roughly $30 million to $4.6 million under the marshals' control.
In court papers Thursday, the government disputed that appraisal, saying its own appraisal has put the property's value at $7 million without a liquor license and $11 million with a license. And that does not include any potential business income, the government said.
The government seized the Crazy Horse Too in September 2007 after Rizzolo failed to sell the club on his own as part of a deal to resolve a criminal case with the government. Rizzolo pleaded guilty to tax evasion and spent roughly 10 months in prison.
The Marshals Service has been trying to sell the club so that Rizzolo can pay off some $29 million in debts associated with the property. Rizzolo owes the government millions of dollars in fines and back taxes, as well as $9 million to a Kansas City area man who was let paralyzed following a 2001 fight at the Crazy Horse too.
In its court papers, the government said the marshals have hired a private law firm that specializes in land use issues to help it persuade the city to give it a liquor license to run the club.
There is some precedence for the government to get involved in the adult business. In the early 1990s, the government operated the Mustang Ranch briefly after it was seized by the IRS.
The government also ran the Bicycle Club, a Southern California card club seized in a drug trafficking case, in the 1990s.
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