Seven Prince George’s County nightclubs are under fire for allegedly violating permits and failing to pay taxes, which officials say has caused nearly $1 million in lost tax revenue. Two of the seven have since been shut down, while the others are in the process to regain their permits.
The illegal clubs were identified through the Maryland comptroller’s office, which then notified law enforcement agencies to prompt an investigation into illegal violations of not paying taxes, not taxing alcohol and entertainment sales and selling alcohol without proper licenses.
Puzzles Event Center in Suitland, De La Swan Event Atrium in Hyattsville, Let’s Chat in Suitland, Crossroads in Bladensburg, Plaza 23 in Temple Hills, Black Amethyst in Temple Hills and CFE Club in Forestville were all subject to surveillance and search warrants, and their owners have been indicted on charges that could put them in jail for more than 15 years each and force each of them to pay more than $30,000 in fines, according to the county’s state’s attorney’s office.
Prince George’s County State’s Attorney Angela Alsobrooks said the club owners’ actions of not paying taxes and running nightclubs outside of compliance were deliberate and said residents should see that the county does not take the offenses lightly.
“We found that many of these establishments required a cover fee at the door to obtain entry and this is a taxable transaction; however, the businesses were not collecting taxes,” she said, noting that the nightclubs also were not collecting taxes on alcohol sales. “This is a signal of our intolerance for any individual who avoids paying taxes, especially at these critical times where state is in fire need of all of our revenues and resources.”
The nightclubs were investigated from June 2011 to January, and only two nightclubs have been shut down — CFE and Black Amethyst — while the others remain in circuit court hearings to address their alleged violations and form agreements to abide by their permits, Alsobrooks said.
Sixteen club proprietors were each given charges to include willful failure to file admissions and amusement tax returns, willful failure to file sales and use tax returns, willful failure to collect or pay sales and use tax, possession of untaxed alcohol, possession of alcohol for the sale without a required license, doing business without a restaurant license and doing business without a trader’s license.
Del. Doyle Niemann (D-Dist. 47) of Mount Rainier, who led the investigation within the county’s state’s attorney’s office, said eight club representatives from four different nightclubs were also given felony theft charges because they were able to tabulate a specific amount of money withheld through evidence authorities recovered. He said other club representatives may face similar charges depending on the outcome of their investigation.
“These were businesses that showed a flagrant disregard of the law,” he said noting that the illegal actions “reflect their outlaw mentality.”
State Comptroller Peter Franchot said as a result of the club owners’ alleged illegal and deliberate practices, roughly $700,000 in tax revenue is missing from the state, and he said the amount may be even $1 million once the investigation is complete.
“These businesses tried to hide their transactions from the state. Every dollar counts in this economy,” he said. “In order to be fair to the businesses that do the right thing, we have to have action and enforcement … . I hope this sends a message that Maryland is not a place to evade tax laws.”
Franchot would not say if there are other specific establishments being targeted currently, but said the comptroller’s office and other agencies are looking into possible violations from other establishments. Franchot said his office is looking into nightclubs outside of Prince George’s County as well.
Alsobrooks said the indictment announcement should serve as a wakeup call to other businesses violating permits and withholding taxable incomes.
“This is a case where these businesses blatantly avoided paying taxes, and this is a crime, and we will not tolerate it,” she said.
Prince George’s County Police Chief Mark Magaw and Alsobrooks said the indictments have a direct impact on improving the quality of life in the county and reducing crime.
“Nightclubs have for long been an issue in this county,” Magaw said. “We’ve made significant strides in closing significant nightclubs, and we want to make sure they stay within their permits. We’re making sure these late-night establishment venues are doing what they are supposed to be doing.”
Magaw said to date in 2012, overall crime is down 5.5 percent and homicides are down by 40 percent, which he attributes to an enforcement focus on nightclubs.