Strip club's ex-owner going to prison for tax evasion

Former strip club owner Larry Kladek will spend 20 months in prison for tax evasion, pay $40,000 in fines and make restitution to the IRS, a federal judge in St. Paul ordered Thursday.

U.S. District Judge Patrick Schiltz rejected Kladek's request to serve 3,000 hours of community service on his property in Inver Grove Heights and said his claims of hardship were "trivial."

Kladek, 66, owned the King of Diamonds strip club in Inver Grove Heights when he was charged last year with evading income taxes through an ATM rigged to funnel cash into a secret bank account. IRS investigators say Kladek amassed about $2 million that he used to buy investments and help build his expensive home.

Kladek pleaded guilty in December to one count of filing a false individual tax return. He also acknowledged owing the IRS more than $912,000 in unpaid taxes. In all, he admitted receiving about $1.2 million in unreported income between 2000 and 2004.

Kladek argued that he should not serve time in prison because he rents 28 farm plots on his ga-ted 78-acre Inver Grove Heights estate where about 50 Hmong families raise vegetables.

"I don't think there's any information before the court that shows that this is true charity work," prosecutor David McLaughlin said before the sentencing. "To me, it has a self-serving flavor."

McLaughlin noted that Kladek began renting out the plots after he was under investigation. Kladek's attorney, Patrick Ledray, said his client's motives are altruistic.

Kladek also wrote to Schiltz asking for community service so he could work his land to grow food for the Harvest for the Hungry Program.

"He can afford to pay someone to prune his crab apple trees and spray weed killer," Schiltz said.

The judge commended Kladek for his work ethic and clean criminal record, but said he acted out of "sheer greed" in deceiving the IRS.

About 40 family members, friends and some Hmong farmers appeared in court Thursday morning to support Kladek.

"What he said, he said," Kladek said of the judge. "Nothing I can do about it."

Kladek spends 40 to 50 hours a week tilling the land, clearing boulders and brush and bringing water to the farm sites, Ledray said. He said Kladek was inspired to provide the land after reading newspaper stories in 2007 in which Hmong farmers lamented the loss of metro farmland to development.

He recently sold the strip club to his wife, Susan, and has until Sept. 22 to surrender to the U.S. Marshals.