Nights on the Circuit: ‘Everything has a price’

Las Vegas’ other real-estate crisis

Xania Woodman

The formalities and posturing fascinate me,” says Jason, a recent transplant to Las Vegas, in an e-mail to me seeking nightclub advice. “They usually flash their cards,” Jason continues, observing the methods of his colleagues, “and say something cheesy like, ‘Can you help us out?’ and slip [the doorman] $20 per person. They always exchange business cards, and next thing I know, we’re in.” Yep, that’s a pretty accurate description of how it goes—or rather, went.

As information about Pure Management Group’s IRS woes seeps out of Las Vegas and into our trusty feeder cities, those e-mails have changed in tone from mild inquiry to blind, impassioned panic. Economics 101 tells me scarcity has begun to set in as jittery bachelors and bachelorettes imagine themselves on the wrong side of the velvet ropes, suddenly unable to even throw money at the problem.

“I assume everything has a price?” Ah, there’s the rub. Everything does come with a price, as many nightlife-industry members are finding out with a little help from the IRS.

It’s true, many clubs have tightened the reins since PMG’s surprise (or was it?) visit from the IRS’ criminal-investigations division. Tips are still passing hands, but the staff member’s share of those tips now comes to him or her in the form of a crisp check, which is received with as much joy as a stubbed toe.

There seems to be a trust issue at hand, something difficult to sic lawyers on. The Nevada Gaming Control Board trusts casinos to be prudent in choosing a tenant. Casinos trust that their nightclub management tenants are forthright about earned revenue and diligent in their business practices. And the nightclubs trust the tipped employees and independent contractors to correctly pay their taxes. But as numerous club staffers have told me, they also trust that if there were something more that they should have been doing other than reporting their on-the-books incomes, they would have been notified by the club.

Don’t forget that some VIP hosts and nightlife staffers have experienced a rags-to-riches story since jumping on Vegas’ runaway gravy train. One host, I’ll call him David, explained that several fellow hosts have been living it up, boasting lavish lifestyles paid for predominantly in tips. They became walking billboards for the kinds of luxury goods and services the clubs want to encourage their guests to embody.

An industry veteran confirmed it: “Smart hosts declare something to support their lifestyle, at least documenting ‘X’ amount.” But whose job is it to make sure that a relatively green junior host properly handles the money he is suddenly flush with? The club? And as trust trickles down, does responsibility trickle back up the ladder, making the casino responsible for a club’s lax attitude toward its employees’ tax situation, or the gaming board responsible for casinos not getting more involved with tenants, especially those with whom they have profit-sharing deals? No wonder everyone’s saying this case could take a year or more.

Down here on earth—as opposed to the higher echelons of corporate finance and casino management—my concern is for David. Where did he even get this influx of cash from? It wasn’t all line-slides and $20 handshakes that have him preparing to turn over three years of tax information (if it exists).

There’s no need to pay David much on the books if he’s making the bulk of his income from table charges, said the veteran, painting a picture of David walking a guest to some less-than-desirable real estate. When the guest balks, the host says that prime tables cost an additional (insert a number with as many zeroes as the host has the balls to tack on). When the bounty has been paid (going straight into the tip pool despite technically being club revenue), the guest is seated. While the practice of table charges is one of the first places the vet says he expects to see change, “tipping will continue, but at a lower level. It’s not gonna go away.” And as for the stern gaze of the IRS? “I think you might see a couple more clubs getting hit.”

Said David rather tartly, “[I] hope someone chokes on their whistle. Welcome to corporate clubbing, America!”

Xania Woodman thinks globally and parties locally. And frequently. E-mail her at [email protected] and visit to sign up for Xania’s free weekly newsletter.

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