IRS will not interfere with brothel licensing in Storey County

Despite reports to the contrary, the Internal Revenue Service has no interest in discouraging development of a brothel in Storey County's river corridor, an IRS agent said Thursday.

Storey County commissioners expressed concern at their meeting Wednesday following a call from IRS investigator Kemp Shiffer to Sheriff Pat Whitten.

During that call, Shiffer allegedly "threatened" Storey officials, saying their bid to acquire Mustang Ranch property in northern Storey County's river district would be dismissed if they pursued development of a brothel in the same area.

It's an allegation Byram Tichenor, special agent in charge of the Internal Revenue Service's criminal investigation division, flatly denied on Thursday.

"Kim Shiffer is an investigator in our Reno office and does not make policy," he said. "I make policy.

"I would like to make it quite clear that the Internal Revenue Service is not in the business of regulating legal businesses operating in the state of Nevada and does not endorse or object to any actions taken by the Storey County Commission regarding licensing procedures," he stated Thursday in a letter.

"Agency decisions regarding seized assets are made at a much higher level than the individual investigator, and if any special agent from this office made comments contrary to this policy, they acted beyond the scope of their authority. I assure you that actions taken by commissioners regarding business licensure in Storey County will have no impact on future determinations regarding Mustang Ranch assets."

Shiffer, when contacted by the Appeal, had no comment. Whitten did not return phone calls.

Storey Commissioner Bob Kershaw, who raised the issue on Wednesday, said he was satisfied by Tichenor's response.

"I believe this was a miscommunication and I'm very pleased with the response from the IRS," said Kershaw. "And I hope we will be able to negotiate with IRS on the Mustang property. I want to do what's best for Storey County and I'm looking toward the future."

Federal agents shut down the Mustang Ranch brothel in 1999 after a federal jury returned 34 guilty verdicts against AGE Enterprises, the corporation that owned the Mustang Ranch and two Mustang employees for racketeering, money laundering, tax evasion and other crimes. The property is still tied up in litigation in the Ninth U.S. Court of Appeals, but Tichenor said the IRS will solicit proposals from the local governments and others regarding disposition of this property, once these issues have been resolved.

"We as an agency hold a fiduciary duty to American citizens to obtain the greatest possible return on the assets," he said. "However, we also work to stike a balance with the needs and desires of the local community, particularly in such unique situations as we face with the Mustang Ranch property."

According to Storey County building official Dean Haymore, Storey officials have submitted a proposal to Assistant U.S. Attorney Greg Addington for the Mustang Ranch.

A public golf course, senior center, employment training facilities and BLM and Fish & Wildlife Interpretation Center are among the many features in the proposal, which also includes a request for 460 acre-feet of Truckee River water rights to maintain the trout streams, natural habitat and golf course areas.

Addington said there are some lingering issues concerning the property that have not been fully adjudicated by the district court, but those issues should conclude within the next two months. He also said there could be appeals by individuals with claims against the corporation and the decision won't be made until all legal issues are resolved.

"A procedure is in place for making that kind of decision and the Treasury Department will make the determination, as to how the property will be disposed of," he said. "The IRS has received a number of proposals and I have received proposals. Those are being collected and evaluated and a decision will be made in due course."

Despite Wednesday's confusion, Storey officials approved Lance Gilman as owner and operator of a new brothel. There is still much work to be done in this process, which could take months. The investigation for Susan Austin, proposed co-owner and manager of the brothel, is still pending.

About 31 acres have been earmarked for the $2 million brothel, to be located on land at Patrick that was once part of the McCarran Ranch, about three miles east of the Mustang Ranch property.