Archive for Wednesday, January 30, 1991


January 30, 1991


A Lawrence nightclub that was padlocked last week by state officials reopened Tuesday, the same day the club's owners applied for renewal of their liquor license and a hearing into alleged liquor violations at the club was completed.

The Power Plant, formerly Pizazz, 901 Miss., was reopened Tuesday night, six days after it was closed by state revenue officials who alleged the owners owed almost $100,000 in tax bills.

Also Tuesday, an Alcoholic Beverage Control hearing on eight charges that the club violated provisions of its liquor license was completed in Topeka and the club's application for license renewal was submitted.

The administrative hearing could result in fines or suspension of the club's Class B license, which expires Feb. 14.

Mike Riling, a Lawrence attorney representing the club's owners, presented two witnesses who refuted statements made by ABC witnesses, which included one Lawrence police officer. Among the charges facing the club were counts of serving liquor to underage patrons, admitting non-members to the club and staying open after regulated hours.

JIM CONANT, acting ABC director, said decisions in such cases typically were made within 10 days. If the club is found to have been in violation of its license, the administrative officer that conducted the hearing could order fines or suspension of license.

"At that point, (the owners) have two options," Conant said. "Pay up if there are fines or close down if there are suspensions . . . Their other option would be to appeal to the secretary of revenue."

The results of an appeal to the secretary of revenue also could be appealed, by either the club's owners or the hearing officer, he said.

"They are not going to let go of this Class B club license without going through their appeals, in my opinion, because that is an asset to them," City Manager Mike Wildgen said.

The state has 30 days from Tuesday to process the application for the license renewal, Conant said. Complaints surrounding the club likely will have little effect on the renewal process.

"WE ARE very much aware that there are problems over there," Conant said. "But we are bound by law to issue a license to anyone who qualifies for a license. If they meet those statutory qualifications, we must renew the license."

He added, "The potential for a denial is there for every application."

The Power Plant's recent request for a drinking establishment license, which would have done away with its need to require memberships, was denied.

"I don't know why they denied that one. They may wind up denying this one. I don't have any knowledge of that, though," Wildgen said. "I am hoping that the (tax) investigation would lead to additional information that they could use in judging whether that license should be renewed or not."

Conant said it was possible for the ABC to close down a club, but that it was not as simple as merely locking the doors.

"There seems to be the perception among the public that the ABC has an iron hammer in these matters . . . there is a little thing called due process," he said.

The nightclub reopened after the Department of Revenue on Monday ruled that the owners had satisfied their outstanding tax debts.

John Michael Hale, an agent for the Kansas Department of Revenue, said state officials ruled that enough assets to cover the tax debt were being held in Douglas County District Court in a case between the revenue department and the owners.

BECAUSE THE state knows the assets exist, Hale said, "We really didn't see any reason to keep the club closed."

State revenue officials last Wednesday padlocked the club in the wake of an investigation that uncovered allegations of tax law violations at the club.

At that time, the state's director of taxation filed tax warrants alleging that DJ's of Hays Inc., the corporation that owns the club, owed delinquent corporate taxes, penalties and interest totaling $72,762, had an unpaid sales tax debt of $18,140 and owed $8,878 in liquor excise taxes.

Tax warrants allow officials to seize money and other property in an effort to recover what the state believes individuals owe.

Riling, attorney for Jon and Don Schmidt, owners of DJ's of Hays, Inc., filed a motion on Friday asking the court to set aside an order of garnishment for bank accounts belonging to the Schmidts and to the corporation.

REVENUE OFFICIALS filed a request for an order of garnishment along with the tax warrants, and Douglas County District Judge Mike Malone issued the order.

Riling stated in his motion that the director of taxation presented insufficient evidence to justify the proceeding.

Among his arguments, Riling said the state presented no evidence that the Schmidts would try to leave the state or destroy or hide assets. Also, Riling stated that although the director of taxation found that the Schmidts were attempting to sell the property, the state presented no evidence that the Schmidts would attempt to hide the proceeds from the sale or leave the state with the proceeds.

The next step in the case is for Malone to schedule a hearing to discuss the order of garnishment. Malone has not yet scheduled the hearing.

AGENTS FROM the revenue department continue to investigate alleged tax violations at the club. Investigations now are centering on financial records and other property seized in a search of the club and the Schmidts' apartments last Wednesday.

The search stemmed from a Lawrence police investigation of alleged tax law violations. Police refused to say how they received information about the allegations.

But their investigation apparently began after a former employee of the club met with city officials, police detectives and a Journal-World reporter to discuss illegal activity the employee claimed to have witnessed at the club.

The club has been the target of complaints from neighboring residents about trash, noise and crime. Crimes that neighbors link to the club include the Dec. 7 shooting of a Kansas University football player.

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