VIRGINIA CITY — The firm that bankrolled Lance Gilman’s Wild Horse Brothel says it was the victim of a scheme designed to cheat it out of more than $1.6 million. Gilman’s lawyers countered Wednesday that it’s TG Investments’ fault the Wild Horse was shut down, given that the firm failed to get a required license.
TG Investment is suing Gilman and other principals in the brothel operation, saying their deal on the $2.25 million loan guaranteed them 1 percent of profits through 2043.
“Instead of following through on their obligation, they stabbed (TG investors) in the back,” lawyer Mark Wray told a civil jury of eight members and two alternates at the Storey County Courthouse on Wednesday.
Gilman’s Cash Asset Management Corp. opened Wild Horse in 2003 using the loan money from TG Investment. The original loan was renegotiated in 2005 and, Wray said, company officials were again assured there was no need for them to be licensed by Storey County because they didn’t own a share of the brothel and the company wasn’t an operator.
But later in 2003, Gilman acquired Mustang Ranch Brothel and opened it for business across the parking lot from Wild Horse along Interstate 80, some 20 miles east of Reno-Sparks.
Wray said they continued to get their payments until 2009, when Gilman’s lawyer, Mark Gunderson, sent a letter saying there were “very serious concerns” about not disclosing the loan to the Storey licensing board. Wild Horse operators stopped making their quarterly payments to TG Investments, and the company sued in June.
Wray said Gilman moved late in 2009 to get the Storey County brothel ordinance changed to require that all people with any financial interest in a brothel be licensed.
He said Gilman used his “connections and influence” to get that done and told county officials that TGI had an undisclosed financial interest in his brothel. That prompted a sheriff’s investigation that resulted in a recommendation in 2011 from District Attorney Bill Maddox that the brothel’s license be revoked.
Gilman, he said, filed to expand Mustang Ranch to include Wild Horse in November 2011. The brothel board revoked Wild Horse’s license a week later and, a month after that, approved expanding Mustang to include both buildings.
With Wild Horse no longer in existence, Wray said, “TG Investments now gets 1 percent of nothing.”
Wray presented figures showing that Wild Horse grossed between $4.7 million and $5.9 million a year from 2005 through 2010. He said that when 1 percent of that cash that TG Investment is owed, along with the calculated value of what would be owed through 2043, are added together along with penalties and interest, the company has been cheated out of more than $1.62 million.
Gunderson said that completely misstates what happened.
“This case is not about all these bad acts that have been spun into this story,” he said.
He said the county ordinance required the company to apply for a license, but it didn’t do that.
“The brothel was closed down because of TG Investments’ failure to do what the law requires,” Gunderson said.
Gunderson said county officials were unaware of TG Investments’ interest in the operation until the lawsuit was filed in June 2009, including the promissory note, loan agreement and payment provisions in the court files.
“The filing of that makes that lawsuit public for anybody to come and take a look at,” Gunderson said, adding that all county officials had to do was walk across the hall and look at the file.
It was after that discovery, he said, that county officials decided to change the ordinance and require everyone with a financial interest in a brothel to be licensed. And he said that plan was noticed and hearings were held, and that TG Investments was completely notified of all the proceedings before the vote in December.
“TGI was given notice, it was fully aware and it is admitted they did nothing,” he said. “They sat on their hands. Had TGI made application for a license like it should, we would likely not be here.”
He also said Gilman lost more than $1 million because of Wild Horse’s closure.
The trial before Carson District Judge James Wilson is expected to continue for more than a week.