Longform

Sexual Dealing

Page 3 of 8

But by then, Rick's corporate structure--a confusing collage of corporations--was falling apart amid allegations of embezzlement, narcotics, prostitution, and illegal transfers of assets. During three years of bitter court fights over Rick's assets, investors and owners of the club rarely seemed to know which corporation owned what part of the club or which partner owned how much of any given corporation.

The court battles began in 1988 when Vernon Young, one of the original investors, filed suit in Houston against Fontenot, Izzedin, and Watters, contending the men were illegally channeling the nightclub's profits into their own pockets, and weren't giving Young his fair share.

When confronted--according to Young's suit--both Izzedin and Fontenot admitted pocketing unreported revenues.

"Izzedin admitted that he had received $45,000 from Fontenot, knowing that the funds were diverted corporation proceeds; and he further admitted that he was going to continue to divert funds until he had diverted $300,000," Young charged in his suit. (Young could not be reached for comment; Fontenot declined requests for an interview.)

The suit also states that former owner Gentry, before his ouster, had hired a consultant to audit Rick's liquor sales; he discovered that more than $1 million was missing from Rick's Cabaret.

By 1988, Fontenot and Watters had turned against Izzedin. During Rick's early days, Izzedin had spent little time at the topless club. When he was there, he was quiet and unobtrusive. But as time wore on--according to his partners' complaints, stated in court records--Izzedin became a party animal, aggressively pursuing dancers and waitresses.

Fontenot and Watters recounted telling Izzedin that his "behavior in picking up and dating numerous of our employees and dancers simultaneously was giving us significant cause for alarm."

The problems reached a new low in January 1988, when a young man came to the club complaining that the "owner of Rick's" had picked up his 16-year-old girlfriend in a black Mercedes and driven her to the owner's house for dinner.

The "owner" was said to be Izzedin.
Watters and Fontenot wrote a letter to Salah the next day, complaining about his conduct. "Apparently [the girl] wears braces and looks even younger than 16 years," the men wrote. "This behavior on your part is totally unacceptable to both of us. People who own and work in a highly visible and successful topless nightclub must maintain standards of behavior that put them above attack for illegal and immoral sexual behavior."

Izzedin responded six days later with a handscrawled, personally delivered note. "I sincerely want to put an end to all the furor and rumors," he wrote his partners. "In all honesty, during the past year, I might have dated a girl too many from the club and women like to talk. However, I never realized the magnitude of the talk (my fault, nobody is perfect). Especially for a man of my position in this city."

Izzedin denied taking the teenager to dinner, however, maintaining that he'd only given her a ride home.

The accusations of sordid behavior only got worse, with Fontenot and Watters later charging, in a 1991 lawsuit, that Izzedin had pressured female employees into having sex and had provided narcotics and promoted prostitution at the club.

And around the same time Fontenot and Watters complained about the 16-year-old, police arrested several of Rick's dancers for prostitution after they'd propositioned undercover Texas Alcoholic Beverage Commission agents inside the club. Rick's was also cited several times for lewdness and drunkenness among its employees, further damaging the club's image. Male agents wrote lengthy reports about dancers fondling and rubbing the agents' genitals, and described how some dancers and waitresses had offered them sexual favors for a fee.

Later that year, Fontenot and Watters decided to force Izzedin as far away as possible from the club's daily affairs--voting themselves president, vice-president, secretary, and treasurer of the corporation that controlled Rick's Cabaret. The move left Izzedin as the only owner who wasn't a club officer as well.

Two weeks later, Izzedin resigned from the corporation's board of directors, saying he wasn't comfortable with the way Fontenot and Watters ran the topless club.

When he left, Izzedin took with him some damaging information about the way Rick's remaining owners had handled the club's receipts. He used it to strike back at his former partners.

In a letter to Fontenot and Watters, included as an exhibit in Young's lawsuit, Izzedin admitted stealing unreported revenues from Rick's and asserted that they had, too.

"I have amended my 1986 federal income tax return to reflect income I received that I did not previously report," he wrote. He demanded that Fontenot and Watters also declare unreported income for 1986 and 1987. If his ex-partners did not respond within 16 days, he warned, he would send a copy of the letter to the IRS.

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Denise Mcvea