In a civil rights lawsuit filed recently, two Denver strip clubs claimed that Denver labor officials showed a “reckless abuse of power” when they launched a wage theft investigation into Diamond Cabaret and Rick’s Cabaret and Steakhouse which led to nearly $14 million in fines.

The 62-page complaint by attorneys representing RCI Holdings alleges that the City and County of Denver, the Denver Auditor’s Office, Denver Auditor Timothy O’Brien, Denver Labor, Denver Labor Executive Director Matthew Fritz-Mauer, and Denver Labor Hearing Officer Ellen Kelman showed “shocking and unconstitutional” overreach in their investigation.

The lawsuit accuses Fritz-Mauer of launching a crusade to “rescue” strippers at these adult nightclubs and insisted that the dancers did not ask for his help.

The clubs allege five main abuses of power by Denver Labor, accusing the agency of:

• Forcing entertainers to become employees against their will
• Illegally accessing employee records through statutory overreach and publicly disclosing confidential entertainer information without consent
• Falsely accusing the club managers of stealing tips from entertainers and employees
• Omitting actual wages paid to employees, failing to account for employees’ earned tips and overtime payments, including duplicate entries and incorrect pay periods and inconsistently applied math formulas in calculating its financial claim
• Deceiving the public and the media

But O’Brien said that what he found in his years-long investigation was one of “the most extraordinary cases he has ever conducted.”

In a statement, the Denver Labor Department said that it would continue its investigation and that “workers at RCI Holdings-owned businesses should contact us if they feel like their rights have been violated.”

Fritz-Mauer indicated that there was much more to the investigation, which started in May 2023 beginning with what the lawsuit contends was a “routine compliance audit.”

However, attorney Leah Vanderschoot claims that the Denver Labor Department illegally accessed confidential business records to conduct its investigation. Together, the clubs were ordered to pay the affected workers about $11.3 million in restitution. That amount is based on the $2.6 million in actual wages stolen, plus 300 percent in damages and 12 percent in annual interest, the auditor’s office said.

The lawsuit also claims that Denver Labor illegally accessed club records and disclosed the entertainers’ information without consent. The clubs also said it’s legal for managers to receive tips when they act as VIP hosts, introducing guests to entertainers, because it’s a separate tipped job.

Diamond Cabaret and Rick’s Cabaret said Denver Labor’s claims didn’t account for tips and overtime payments paid to employees and included multiple mistakes. They said the claims against them have harmed their businesses and accused one entertainer of making false public statements that have exacerbated the issue.

According to the Denver auditor, if restitution is not paid by mid-March, wage theft penalties will increase to 150% of unpaid wages.