Despite Public Opposition, Council Approves Liquor License Transfer for King of Diamonds

Russell Liljedahl appealed to the Inver Grove Heights City Council to “do the right thing” on Monday night by closing down the King of Diamonds strip club.

Marsha Schauer told council members of the awkward questions her seven-year-old asked when they made a family trip to the recently redeveloped —and were forced to drive past the all-nude nightclub.

Dian Piekarski urged the council to look deeper into any connections between the business and its former owner, convicted felon Larry Kladek.

But try as they might, the handful of Inver Grove Heights residents who spoke out at a public hearing on Monday night could not convince the council to reject a request to transfer the business’ liquor license to its soon-to-be new owner, Debra Kalsbeck—a move that would have effectively shuttered the 45-year-old strip club.

While Mayor George Tourville and other councilors appeared sympathetic to the public’s concerns, the council had no legal grounds to vote down the transfer request, Tourville said. Ultimately, the council voted 4-0 at the meeting to approve the liquor license transfer. Councilor Bill Klein was absent for the decision.

The hour-long public hearing on Monday night was the latest in a long line of developments involving the beleaguered gentlemen’s club, located along Concord Boulevard in Inver Grove Heights.

In 2009, Kladek was sentenced to 20 months in prison on a federal tax evasion charge. After ownership of the business was transferred to Kladek’s ex-wife, Susan Hansen (formerly Susan Kladek), the company filed for bankruptcy. The club also fell victim to a class-action lawsuit filed by some of the dancers it employed, who claimed the King of Diamonds intentionally violated state and federal wage-and-hour laws.

But all that is in past, Kalsbeck said at the council meeting.

Under an amended Chapter 11 bankruptcy reorganization plan filed on April 18, all of the shares for Kladek, Inc. would be transferred from Hansen to Kladek, who will then sell the shares for $7.2 million to Kalsbeck, his daughter.

Kalsbeck would then become president of the company, and will take over the responsibility for management and business decisions for King of Diamonds. Kladek, who still owns the King of Diamonds property, will lease the building for $12,000 a month to Kalsbeck’s company, KOD Holdings, Inc.

The plan, which hinged on the approval of the liquor license transfer, is likely the best chance the state and federal governments have to get the money they are owed, City Attorney Tim Kuntz said at the meeting. Under the reorganization plan, Kalsbeck will make monthly payments of roughly $16,000 to the Minnesota Department of Revenue and $26,000 to the IRS.

Kuntz characterized the plan as a “commercially normal transaction,” but made Kalsbeck state before the council that Kladek will no longer have an active role in the business. Minnesota law prevents convicted felons from holding a liquor license.

Although one member of the audience spoke in defense of the club, the majority of residents criticized the King of Diamonds and voiced concerns over its proximity to two major city park facilities: Heritage Village Park and the Rock Island Swing Bridge.

“It’s not a good testimony to our city,” Liljedahl said of the nightclub. “We’re asking people to come down and look at the pier, and this is what they’re going to be driving by.”

“What’s legal is not always what’s right,” Dan Schauer said, referring to the liquor license transfer. “The question I want to pose to our council is, ‘Is this the right thing to do?’”