Ownership May Change Hands Once Again at King of Diamonds

More than two years after the longtime King of Diamonds Gentlemen’s Club owner sold the business to his ex-wife, Susan Kladek, the business is changing hands once more.

Under an amended Chapter 11 bankruptcy reorganization plan filed on April 18, all of the shares for Kladek, Inc. would be transferred from Susan Kladek and Larry Kladek to Larry’s daughter, Debra Kalsbeck. Kalsbeck would then become president of the company, and would take over the responsibility for management and business decisions for King of Diamonds.

Before the change of ownership can be completed, however, the Inver Grove Heights City Council must approve the transfer of the King of Diamond’s on-sale liquor license. The council set a public hearing on the subject for June 13.

Kladek Inc., which filed for bankruptcy in July 2010, owed $1.9 million to Alliance Bank of St. Paul and $1.7 million to the IRS, according to bankruptcy documents. The company also owed nearly $1.1 million to the Minnesota Department of Revenue and smaller fees to a number of attorneys.

The bankruptcy petition came nearly a year after Kladek himself was sentenced to 20 months in prison and a $40,000 fine on one charge of filing a false tax return. A federal grand jury alleged in a complaint filed in 2008 that Kladek siphoned roughly $2 million over three years from a rigged ATM machine installed in his strip club in 1999. That money was used to purchase stock in Xcel Energy, among other companies, and build an extravagant home in Inver Grove Heights. The Pioneer Press reports that Kladek and his wife Susan are no longer married. Repeated phone calls to the attorney representing Kladek, Inc. in its bankruptcy case were not returned.

In its decision whether to approve the liquor license transfer, the council will have to weigh the information presented in the background check conducted on the establishment, City Administrator Joe Lynch said. Because Larry Kladek is a convicted felon, Lynch said, councilors will also review the terms of the financial agreement between Kalsbeck and Susan Kladek to make sure Larry Kladek no longer has a majority share in the business.

King of Diamonds was hit with a liquor license violation last year for serving alcohol to a minor, but that alone isn’t grounds to refuse a transfer of the liquor license to a new owner, Lynch said. For the council to refuse approval on a liquor license transfer, the business must have demonstrated a repeated pattern of abuse, must have past or current alcohol or gambling violations at the state level, didn’t pay its taxes or didn’t pay its vendors, among other issues, Lynch said.

 “There’s an individual who’s not allowed to hold the license because they’re a convicted felon, but we’re not dealing with that individual,” Lynch said.

Founded in 1965, the King of Diamonds bills itself as a totally-nude gentlemen's club. The business is located at the intersection of Concord Boulevard and River Road in Inver Grove Heights.