The busy ATM at the King of Diamonds gentlemen's club in Inver Grove Heights didn't just spit out cash for patrons to tip strippers. Federal agents say it also pumped about $2 million into a secret account for the strip club's owner.

A federal grand jury on Monday indicted Lawrence F. Kladek, 65, on four counts of tax evasion and five counts of filing false tax returns.

In an interview Tuesday afternoon, Kladek said he had not heard about the indictment. He faces up to five years in prison on each of the tax evasion counts and three years on each of the false tax return counts.

Federal officials said Kladek had the ATM put into the King of Diamonds in 1999. But this wasn't just an ordinary ATM.

The way it normally works, when a customer withdraws cash from an ATM, money is transferred from a customer's bank account into an account used to replenish the ATM. In this case, investigators say, every time customers withdrew cash at the club, money was transferred from their bank accounts into a separate account that IRS investigators say Kladek kept secret from his income tax preparers.

Federal officials say Kladek then used the secret account to pay for about $1 million in personal expenses and investments.

In addition, investigators say, he diverted about $1 million from the account to make a partial payment on a home in Inver Grove Heights.

The indictment alleges that Kladek tried to evade a large part of the income tax he owed on that money for 2000 through 2003, that he filed false individual tax returns from the years 2001 through 2003 and that he filed false corporate tax returns for tax years 2001 and 2002.

The U.S. attorney's office announced the indictment on Tuesday. IRS investigators would not comment on the case.

According to the King of Diamonds website, Kladek opened the club in 1965, introducing "go-go" dancers in one-piece swimsuits the next year. The King of Diamonds now bills itself as the only club with totally nude dancers who serve alcohol. More than 70 dancers work at the club.

"I don't know anything about it," Kladek said of the indictment. Asked about the specific charges, he said he had done nothing wrong.

"The only reason that I set up a separate account is that my bank wouldn't touch my ATM account," he said. "Not too many places back then would set up an ATM account."

Kladek would not comment specifically on the charges that he hid income or evaded income taxes on that money. Nor would he comment on how investigators say he used the money.

"This is the first I've heard anything about it," Kladek said. "Now I've got to call my attorney and talk to him."

James Walsh • 612-673-7428