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Strip Club Owner Charged With Evading Taxes

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CHICAGO (CBS) A Chicago area bar and strip club owner is facing federal tax charges, after he allegedly avoided taxes by hiding $12 million in cash from his strip clubs in a warehouse.

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Michael G. Wellek, 63, of Libertyville was charged in a two-count criminal information filed in U.S. District Court Thursday, with with one count of obstructing the Internal Revenue Service in collection of taxes and one count of filing a false income tax return, according to a release from the U.S. Attorney’s office.

Wellek was the owner and operator of three gentlemen’s clubs: Heavenly Bodies at 1300 S. Elmhurst Rd. in Elk Grove Village, Skybox at 341 E. 167th St. in Harvey, and Cowboys at 2829 W. 167th St. in Markham, according to the release

In May 2003, IRS agents seized about $12 million in cash — stored in bags marked with the date and location where earned — from a warehouse in Elk Grove Village where Wellek conducted business, the release said. Wellek allegedly failed to tell the IRS that from 1999 through 2003 that he routinely diverted cash from his businesses to the warehouse, according to the release.

The charges also allege Wellek did not file personal income tax returns from 1989 through 1999 despite operating profitable businesses, according to the release. And he allegedly made false statements about his assets and income to impede an IRS audit.

Operating the businesses as sole proprietorships, Wellek was required to report gross income and expenses on self-employment schedules attached to his federal tax returns, and include net income in calculating his individual income and income tax.

But he allegedly settled with the IRS on his tax liability for 1989-99 while concealing and understating club receipts by at least $1.5 million, the release said.

The false return count alleges he reported total income of $115,769 in 2000 while hiding an additional $2 million in income from Skybox and Cowboys.

Each count carries a maximum penalty of three years in prison and a $250,000 fine, the release said. Wellek will appear for arraignment at a later date in U.S. District Court.

In 1995, Wellek claimed that he didn’t file personal income tax returns for several years because he simply wasn’t making enough money, according to a Chicago Tribune article.

Six years before that, Wellek had filed for a liquor license from the county claiming that he had lived with his parents in Des Plaines for all but one year of his adult life. He also said at a 1995 hearing that he was vice president of the United Fire Protection sprinkler system company operated by his father, and took no salary from the company, the Tribune reported.

Wellek claimed in later court filings that he held the cash generated from his strip club that he only kept the cash generated by the strip clubs long enough to put it in the bank, and said he was not hiding the $12 million found in the warehouse, but rather led IRS agents to it, the Tribune reported.

Wellek’s strip clubs have also received attention from authorities. Cook County Sheriff’s police arrested nine Heavenly Bodies dancers on prostitution and public indecency charges, and also arrested a Skybox manager, in 2001, the Tribune reported.

The charges were ultimately dropped, but the police reports led county liquor commissioners to fine Heavenly Bodies $2,400 and suspend its liquor license, the newspaper reported.

Wellek is also the owner of Sound-Bar, the popular laser-lit dance club at 226 W. Ontario St.

The Sun-Times Media Wire contributed to this report.