Rick’s Cabaret, a publicly traded company that operates a chain of adult nightclubs, refuted the allegations of wrongdoing and rumors that it has been named in a federal indictment, which was handed down on March 16 by the U.S. District Court in New York.
According to the indictment, members of the Brooklyn, N.Y.-based Colombo and Luchese crime families falsely inflated the prices of more than a dozen stocks by promoting penny stocks before selling their own personal holdings at a profit. Among those companies, Rick’s is reportedly named.
Charges against the mobsters include racketeering, conspiracy and extortion of more than 15 New York brokerage firms. The indictment also said members of the mob threatened brokers with physical harm if they did not aggressively promote certain companies’ business value.
Rick's Cabaret President and CEO Eric Langan addressed shareholders and the press this weekend, stating clearly that the company was not involved in ratcheting up its share price, nor was it involved in tampering with other companies’ share value.
The alleged stock tampering occurred in the late 1990s and early 2000.
Several major press outlets, including the Dow Jones News Service, the Wall Street Journal and New York Post, ran stories on the alleged scheme, naming Rick’s as one of the companies involved.
“We know nothing about these allegations and have had no contact with the Department of Justice or anyone else on this matter,” Langan said, accusing the press, including the Associated Press, of publishing false reports on his company’s involvement with the scam.
“We have never heard of any of the people named in this reported Justice Department indictment, we have no relationship with any of them, and we know nothing about these allegations,” Langan asserted. “The first we ever heard of these charges was when we read about them in the Wall Street Journal. Our stock trades in an orderly and transparent fashion and has done so for many years.”
Langan further criticized the AP for running an additional story claiming that Rick’s stock value had plummeted because of the allegations of wrongdoing.
“The AP seems to have violated the most fundamental principle of good journalism – be accurate and get a source for your story before you publish it,” Langan said. “The sensationalist headline is absolutely false and obviously the AP had no source, or else the story would have cited it.”
Rick’s Cabaret stock was down Friday by 45 cents from a close of $6.20 the day before.
Rick’s has seen more than a 50 percent rise in stock value since the beginning of 2006, which Langan attributes not to a mob-related scam, but to the company’s solid financial performance in previous years.
