Libertyville strip club owner charged for defrauding IRS

New charges of defrauding the IRS have been handed down against a Libertyville man who authorities say diverted more than $12 million in cash from three adult entertainment clubs he owns.

Michael G. Wellek, 63, was charged this week with one count of obstructing the Internal Revenue Service in the collection of taxes and one count of filing a false federal income tax return.

Wellek is expected to appear for arraignment at a later date in U.S. District Court. Attempts to reach his attorney, Terry Ekl of Lisle, were unsuccessful Friday.

Assistant U.S. Attorney Patrick King said Wellek is the owner and operator of three Illinois adult entertainment clubs, including Heavenly Bodies in Elk Grove Village.

King said entire issue surrounds Wellek not filing personal income tax returns between 1989 and 1999, despite operating the successful businesses.

After the IRS began investigating the missing returns, King said, Wellek spent the next four years impeding federal auditors by claiming the adult entertainment businesses made less than reported, and provided false information about his assets and income.

For example, King said, Wellek told IRS investigators he deposited all business proceeds into bank accounts, but Wellek was actually taking cash from the businesses and storing the money in a warehouse in Elk Grove Village.

In 2002, Wellek and the IRS settled on an amount the business owner was to pay in back taxes, King said, but that settlement did not include the cash Wellek had been hiding in the warehouse.

Investigators discovered $12 million in cash in the warehouse that was not accounted for in May 2003.

The bags of cash were discovered with a date and location of each club where the profits were made.

King also said Wellek reported a personal income of $115,000 to the IRS in 2000, but his true income was about $2.1 million.

In 2004, Wellek filed a federal appeal asking the IRS to return the $12 million, but a U.S. District Judge rejected the request.

Wellek was hit with a $1.2 million fine for fraud in 2004, but his appeal on that ruling is pending.

Each count against Wellek carries a maximum penalty of three years in prison and a $250,000 fine.

In addition, officials said a defendant convicted of tax offenses faces mandatory costs for prosecution and remains liable for any taxes, penalties and interest owed.