STILL CLOSED: Platinum Plus, padlocked since December 2006, remains closed after its owner, Ralph Lunati, was sentenced Friday to 18 months in prison. Federal authorities will auction the building and property and get to keep more than $200,000 in cash seized in the club. -- Photos By Bill Dries
It might have been one of the more unique statements ever made during a sentencing hearing in Memphis federal court.
"I didn't realize the girl shows were prostitution. But I should have," strip club owner Ralph Lunati told U.S. District Court Judge Hardy Mays last week in the U.S. District Court for the Western District of Tennessee.
Lunati was sentenced Friday to 18 months in prison for conspiracy to commit racketeering. Under the terms of the plea deal announced in November, when Lunati was charged and pleaded guilty in the same hearing, Lunati could have taken back his guilty plea if Mays had sentenced him to more than a year and a half.
"The sentence is a fair sentence," U.S. Attorney David Kustoff told reporters Friday.
As part of the plea deal last week, Lunati also gives up the Platinum Plus property at 2514 and 2518 Mount Moriah Road. The $207,423 in cash seized in the club when it was raided also is forfeited as part of the deal.
Mays imposed no fine because of the forfeiture, which is four times the maximum fine allowable under federal law. After the hearing, Kustoff and Shelby County District Attorney General Bill Gibbons announced that the building, land and belongings still in the building should be auctioned in March.
Lunati also gives up his interest in Tunica Cabaret club on U.S. 61 South and another $19,297 in cash seized there. The forfeiture of that club still is pending in a civil case before Mays because of other owners.
Tunica Cabaret co-owner Jason Youngblood pleaded guilty in August to one count of managing a location used in the sale or distribution of drugs. He was sentenced by Mays to two years probation in December.
The redacted judgment covers offenses "committed on or after Nov. 1, 1987" according to court records. Some parts of the court files involving Youngblood also were sealed.
Gibbons said others could seek to open a strip club in the Platinum Plus building. But he added the new sexually oriented businesses ordinance passed last year that applies to Memphis and unincorporated Shelby County would make it a much different nightspot than the one described by the undercover officers.
"We think that's going to go a long way toward cleaning up this industry," Gibbons said. "Under that ordinance, alcoholic beverages cannot be sold or consumed on the premises."
As Lunati prepares to be assigned a federal prison and report date from the Bureau of Prisons, the ordinance is the target of a federal civil lawsuit filed in January by seven of the city's remaining strip club owners.
One of Lunati's attorneys, Ted Hansom, said he doubts Lunati will be joining the legal cause or rejoining the ranks of the city's nearly 40-year-old strip club industry after he emerges from prison.
"I don't know that Mr. Lunati has any intention of trying to start up another club or anything like that," Hansom said. "Because of his age (63), he probably wants to look toward not doing something like that."
Padlocked Plus: Platinum Plus is set to be auctioned later this year by federal authorities.
The live sex shows featuring two women that were a feature of Platinum Plus are at the heart of his conviction and sentencing.
Lunati and his attorneys, Leslie Ballin and Hansom, tried to distance him from the enterprise by saying the women paid the club to perform there and then made their money from the tips.
"There was no exploitation of these people," Hansom argued in court. "They weren't coerced."
Mays countered that under the law they didn't have to be coerced.
Mays concluded the club was dependent on such shows and the income from
them. He cited the ATMs in the club that charged a $5 fee to make a withdrawal. The fee went to the club. And getting change or an advance from the bar came with an agreement that the club got to keep 10 percent of that.
Mays also quoted from a court transcript of comments by a long-time Lunati employee, John Bernstein, who said what arguably was the city's best known strip club was "built on two-girl shows."
Bernstein also was charged in the case and pleaded guilty in September to a federal fraud conspiracy charge. He is scheduled to be sentenced next month.
"It is also apparent that this ... was a core part of his business and perhaps without them his business wouldn't have succeeded," Mays said before addressing Lunati directly. "You have not only income but an attraction that kept people coming to these clubs. ... This was not a singular act. It was not an impulse."
After the hearing, Hansom told reporters it wasn't considered prostitution until Tennessee court rulings in recent years that changed the definition from sexual intercourse for hire to "anything for sexual gratification for hire."
"What bothered us about this case from the beginning was ... (police) had been in Mr. Lunati's club and observed the conduct they complained of on many occasions.And each time they would charge the female with indecent exposure or a violation of some city ordinance - never with prostitution," he said."Then on the night they came in and seized all the money and the club they charged the ladies with prostitution. The federal government jumped in and said, 'Aha, we've got money transfers through the wire. We've got jurisdiction. There's prostitution going on here.'"
Mays dismissed that, saying the issue was Lunati's role in promoting a commercial sex act.
"That's illegal. The issue is 'Are they being paid' and they are," he said in court.
The December 2006 raid followed by the indictment of Lunati, Bernstein and Youngblood ended a two-year long police undercover investigation.
The operation went public soon after a consultant with Duncan Associates of Austin, Texas, who has examined strip clubs in numerous American cities, issued a report to elected leaders.
It said the Memphis clubs, including Platinum Plus and Tunica Cabaret, were the wildest he had ever encountered, with laws and ordinances flaunted at every turn. Eric Kelly said in his report the clubs went far beyond the boundaries set for the legal operation of legitimate adult-oriented nightclubs.
Nevertheless, Lunati came to his sentencing hearing with letters of recommendation that described him as a model citizen. He also listed his contributions to local charities. The list of contributions
and the letters testifying to his good character are due to be made a part of the public case file in federal court now that the case is over.
Mays accepted the plea deal, which went below sentencing guidelines that start at a year and nine months in prison, in part because Lunati was considered to have no criminal history. That was despite doing two months in prison on prostitution and obscenity charges for his part in running a swingers club in the late 1970s and early 1980s.
"That was too old to use. Remember the issue is does that tell the judge that this man has a continuing criminal history or that society needs protection from him," Hansom said later. "The judge noted that but said that in effect you're talking about more than 25 years ago. And so in terms of do you sentence somebody now and punish somebody now for conduct 25 years ago, he said no."