Denver Strip Club Could Lose Licenses After Allegedly Stealing Millions in Wage Theft

In a historic move, Denver's licensing department will require a hearing over business permits at the Diamond Cabaret in downtown Denver after allegations of wage theft at the strip club.

According to a show-cause order issued today, May 14, by the Denver Department of Excise & Licenses, Diamond Cabaret’s liquor, cabaret, billiards, tobacco store and private security employer licenses are all in question after the Denver Auditor’s Office released a report in February alleging that millions of dollars of wage theft occurred at the business.

Diamond Cabaret is appealing Denver Labor's decision, and its attorneys believe the city's latest action is unwarranted.

The club, located at 1222 Glenarm Place, and its sister business, Diamond After Dark, located at 511 West Colfax Avenue, must both show the city why they should keep their licenses.

RCI Hospitality Holdings owns both businesses along with several other strip clubs around Colorado; it also owns Bombshells, a military-themed breastaurant that opened in downtown Denver earlier this year.

Excise & Licenses can consider revoking a license if the department has reason to question whether the business will be lawfully operated. When a business is found to violate the law, such as Denver’s minimum wage and theft laws, the department may take action.

In May 2023, Denver Labor, which is part of the Denver Auditor’s Office, opened an investigation into the Diamond Cabaret. According to auditors, strip clubs are a high-risk business type for wage theft violations.

By this past February, Denver Labor believed its suspicions were correct: The Diamond Cabaret stole wages from bartenders, servers, DJs and entertainers as part of the company’s business model, according to a wage theft determination issued by the auditor’s office.

The auditor’s office found that workers were illegally required to share tips with managers and were paid less than minimum wage. On the entertainer side, Denver Labor found the dancers worked solely on tips and actually had to pay Diamond Cabaret for shifts. According to the wage-theft determination, that is illegal as “businesses cannot require workers to pay for the privilege of working.”

“These violations are no accident, nor do they reflect a good-faith misunderstanding of the law,” the Auditor's determination found. “They are the result of a system designed to depress staff income and divert money to managers and the Club itself.”

As a result, Denver Labor ordered the Diamond Cabaret to pay $5 million in restitution to workers and over $1 million in fines to the city.

Leah P. VanLandschoot, one of the Diamond Cabaret's attorneys, argues that the city is harassing the strip club.

“This is just more retaliation and harassment from the City of Denver against a business following all local, state, and federal rules, regulations, and laws. The City Department of Excise and Licenses wants to take action based on totally false allegations fabricated by Denver Labor, a department of the Denver Auditor’s Office," VanLandschoot says in a statement, "allegations that we have already filed suit in Federal court to dismiss. Other businesses in Denver should beware.”

According to city records, the city has never taken disciplinary action to revoke a license due to alleged wage theft.

Along with wage theft, retaliation against multiple workers who reported wage theft and a refusal to produce records during the investigation also allegedly occurred, and could contribute to the Diamond Cabaret losing all of the club’s business licenses.

A hearing over the future of the Diamond Cabaret's business licenses is set for June 26. In the meantime, the club is allowed to operate.