The Las Vegas District Court has given Steve Davidovici, a Las Vegas nightclub operator, three years of probation and eight months of electronically monitored home confinement after Davidovici pled guilty for running a tip scam. Davidovici was also ordered to pay the Internal Revenue Service over $140 thousand in restitution on the $7 million tip scam.
Davidovici’s guilty plea came after a four-year investigation by the Internal Revenue Service (IRS), who had received information that Pure employees were not paying income tax on or reporting their total tip income. Over a 30-month period between 2005 and 2007, Davidovici, the former co-operator of Pure nightclub at Caesars Palace controlled a tip scheme, which the Justice Department called a multi-year tax fraud that involved Pure executives, VIP hosts, and doormen. Every night, VIP hosts and doormen would pool their tips, and at the end of the week everyone, including Davidovici and club executives, would get a share of the tips. For 2006 and 2006, Davidovici failed to report over $400 thousand in tip income. In 2006 he filed a false federal income tax return.
Under the Fair Labor Standards Act, tipped employees are those who customarily and regularly receive more than $30 a month in tips. Tipped employees are required to keep a record of their tips and report tip income on Form 4070, Employee’s Report of Tips to Employer or on a similar statement. Form 4070 or a similar statement is due on the 10th day of the month after the month the tips are received. Form 4070 or a similar statement must be signed by the employee and must show the following:
• The employee’s name, address, and SSN.
• The employer’s name and address.
• The month or period the report covers.
• The total tips received.
No report is required from an employee for months when tips are less than $20. Tips received are reportable on an individual’s federal income tax return, and are generally subject to withholding.
Federal prosecutors sought an 18-month prison sentence for Davidovici because he lied and actively concealed facts from IRS auditors, helped subordinates to do the same, misled licensing authorities, and made deceptive submissions to the court. Additionally, Davidovici intimidated tip scam whistleblowers by threatening to make it impossible for them to work on the Las Vegas Strip again, then stealing data from their personnel files to pull off this vendetta. U.S. District Judge Kent Dawson indicated he was letting the nightclub operator stay “free” so he could get the care he needs for his eye condition, acute optic neuropathy, which threatens to leave him legally blind.
In addition to Davidovici, three former Pure hosts and the ex-head doorman also have pleaded guilty to filing false 2006 tax returns. Tougher regulatory control over how Las Vegas nightclubs do business within the casino industry has also been implemented.
The Las Vegas law office of Lagomarsino Law did not represent anyone involved in any cases that may be referenced above. This commentary is for educational purposes. If you would like to be represented by an attorney in our Las Vegas office, contact our office for a free confidential case review and receive a response within 24 hours. Call Toll Free 866-414-0400.