The Yassine Sixth Street Noir
Legends, rumors, unpaid taxes ... and coke on the side
March 22 was a slow day on the News desk. This was Austin in campaign season, not Chicago during Prohibition.
And then the word came: The feds had raided a bunch of Downtown bars. Reports were vague, but this was not a polite operation. Sixth Street workers were saying the FBI was out in force and in full SWAT gear, dragging boxes out of Treasure Island and into a U-Haul trailer. That was the proverbial tip of the iceberg: Backed by a slew of acronyms in uniform – the IRS, TABC, APD, and the state Comptroller's Office – the feds were moving from bar to bar in what was clearly a targeted operation and not some random sweep. Before heading Downtown to check out the busts myself, I asked around to see if anyone in the office had heard anything.
Nothing – but then something strange happened. Without any prompting or details, someone asked: "Is it the Yassines?"
To some, the Yassines were the kings of Sixth and the Warehouse District. Theirs were the glossy, high-end, high-concept establishments – one step below private clubs, one step above shot bars. They were the men who introduced bottle service to Austin and built a shark tank into the dance floor at Qua. No one could ever accuse them of scrimping on their bars, but on the street, they were always divisive. "Too Dallas," the scuttlebutt went. Disgruntled ex-employees were suing over unpaid salaries. Kiss & Fly had a reputation for being the least gay-friendly gay bar in town. And since half the time they looked empty, how were these places making any money? The feds and the state of Texas think they know.
It's easy to turn a profit if you don't pay your taxes and deal coke on the side.
"Under the Borgias they had warfare, terror, murder, and bloodshed, but they produced Michelangelo." – Harry Lime, The Third Man
Let's recall a bit of history. Austin's Downtown club scene has not always been a virginal institution – rather, it's part of the charming outlaw legend. Take Ben Thompson, the elected city marshal in the 1880s: Before he was gunned down in a San Antonio vaudeville theatre, he lurched from war hero to felon to saloon owner to wanted murderer to peace officer. In more recent years, Clifford Antone remained the heart of the live music scene in spite of (or, some might argue, because of) his two convictions for marijuana distribution. As for run-ins with the IRS, that virtually elevates you to the status of folk hero – just ask Willie Nelson. And speaking of Willie, hunt down his 1984 movie Songwriter: Rumor has always had it that the inspiration for gun-toting, wheeler-dealer promoter Dino McLeish was none other than Tim O'Connor of Direct Events – half the club bookers in town built their Rolodexes in O'Connor's offices.
But the Yassines were a different breed on a different level – the forefathers of a new generation of upscale clubs. The figurehead was Hussein Ali Yassine: Better known as Mike, he was the founder of Yassine Enterprises and, by all ordinary measures, a true American success story. Chubby, balding, always smiling broadly in photographs, the 40-year-old Lebanese immigrant had risen from nothing, renting Downtown properties and renovating them into night clubs. He became a multimillionaire and took his brothers with him.
Mohammed Ali Yassine, aka Steve, is two years Mike's junior, but his graying temples make him look older. He has his own firm, an energy drink company called Kowabunga, but stayed close to his brother's deals. At 35, Hadi Ali Yassine is the youngest of the three and looks it. Leaner, with brown, curly hair that would never give away his kinship, he stayed in the family trade, first running Pure Ultra Lounge and then starting Famous Vodka.
It all looked perfect. They could be flashy – a common story is that they were never without their Rolexes – but that's not a crime. Under Mike, Yassine Enterprises ran eight clubs, stretching from Sixth to the Warehouse district, and had recently been picking up rave reviews for its first foray into dining, Stack Burger Bar. Last November, they'd even dropped some cash at the Austin Art Cow Auction, a celebrity-studded charity event hosted by Jay Leno. In an obvious nod to the club roots of their fortunes, they acquired "Discow," a mirror-covered grazer that they stuck on a rotating platform on the roof of Stack, creating a glitter-ball effect across West Fourth.
The clubs seemed to be surviving the recession well enough: The heart of the empire remained the desperately unhip Treasure Island, but the business itself was moving to the more upscale stretches of the Warehouse District. That was where the Yassines had their offices, and they were eyeing the vacant site at 219 W. Fourth for their ninth club. They had even made forays into the gay scene, with Hyde and Kiss & Fly. It's easy to imagine Mike in his condo at the Downtown Hilton, staring down at the empire he had built. Life looked good.
Then the IRS, FBI, APD and just about every agency with a badge raided their businesses, their houses, and their associates, and dragged them all to jail.
"It's like any other business, only here the blood shows. " – Midge Kelly, Champion
On March 27, the press corps got its first real look at the Yassines outside the lifestyle pages. That was the first day of their detention hearing in the U.S. Federal Court, Western District. The three brothers, dressed in the dreary green stripes of the Bastrop County Sheriff's office jail (where they're being held), were joined by seven of their associates and enough lawyers that visiting magistrate Judge Dennis Green had them wait their turns in the jury box. It took short, serious, bullnecked U.S. Assistant Attorney Gregg Sofer several hours just to lay out the barest bones of the government's case: In 2006, the feds recruited a cousin of the Yassines as a confidential source. For the next two years, through a series of sting operations, wiretaps, and hidden cameras, he helped the feds assemble a case that mixes up coke, money laundering, and even international terrorism. Although the defense presumably knows who this source is, his identity and current whereabouts have not been discussed in court.
While the press and the blogosphere have gone on a feeding frenzy over Mike, Steve has the most charges pending. According to the feds' indictment, Steve was the linchpin, connecting the informant with coke, and then bringing in Mike as a means to launder the money. His attorney, Stephen Orr, told the court Steve's biggest sin was that he wanted to make some money and that "he knew someone that had access to cocaine." During the pretrial hearings, Orr has hinted that this is all entrapment. Every potentially criminal act was instigated by the informant he argued, and if his client was such a risk to society, why did they leave him or any of the defendants on the streets for so long?
Then there was Nizar Hakiki, a Moroccan-born naturalized citizen and a family friend. When he was arrested, he was a risk management specialist with the Texas Facilities Commission. Prior to that, he had spent a few months in Iraq as a translator for a private security firm. When the alleged crimes were committed, he was a real estate agent with Keller Williams. It was Steve who introduced the informant to Hakiki, and then – according to the government – it was Hakiki who provided him with a kilo of cocaine. The informant told Hakiki that he was dealing up in Colorado, and he needed a gun, "a weapon that was good for the ability to hurt someone up close without causing a loud noise or a disturbance," Sofer told the court. Hakiki provided a .22 caliber pistol and later, when the informant said he needed something with more stopping power, Hakiki came up with a 9mm. The first deal, according to testimony by DEA Agent Randel Gillette, happened at Hakiki's office, the second, at Steve's house.
Around them is a circle of minor players. There's Karim Faiq, the taxi driver whom the feds paint as Steve's wheelman, and have charged with distribution of cocaine and conspiracy to distribute. According to Sofer, the first coke buy happened in the backseat of Faiq's taxi outside of Steve's house. Faiq's lawyer, Ben Florey, has told the press that it is all a misunderstanding, that his client is just a taxi driver. Then there's Amar Thabet Araf, Sami Derder, and Edgar Orsini, who are the targets of cocaine distribution charges, and Alejandro "Cueta" Melendrez, who the government claims is connected to the Texas Syndicate and threatened the informant. All of them face potentially serious sentences, but the coke and gun charges will have to wait their turn. On May 4, Judge Sam Sparks and the lawyers came to an agreement: They would deal with the money laundering case first.
"Follow the money." – Deep Throat, All the President's Men
A case this big, with this many defendants, is actually a series of cases. With 10 defendants, five different prosecutions, hours of video and audio, 500 boxes of seized documents, and transcriptions from both French and Arabic, there's no way all this will be handled in one quick trial. So the court will first address the cash. With jury selection set for Oct. 1, that means a lot of people on bond for months, waiting to see which way the dominoes fall.
According to the government's case, after accepting the coke and handing it to the feds, the informant was holding a big stack of cash, supposedly from dealing in Colorado, but really from the feds. So he approached the Yassines about how to handle it all. That's where Mike and his executive assistant Marisse Marthe Ruales come into the picture. According to the feds, they not only came up with the idea of laundering the cash through Yassine Enterprises, but they also walked the informant through the nuances, cut checks, and even proposed setting up a fake cleaning company so they could filter payments through to the informant almost indefinitely. Allegedly, they then literally handed little brother Hadi $100,000 from the bag of coke cash to put directly into startup costs for Famous Vodka.
But it's not just illicit money that the feds are looking at; the legal revenues of Yassine Enterprises are causing consternation as well. Each of their bars was run through a separate corporation – a pretty standard technique to ring-fence liability. However, it looks as if someone may have been pretty good at cooking the books. Like many bars, they used the computerized Aloha point-of-sale system to place orders and track customer tabs (only Fuel and Treasure Island still used cash registers). All the receipts and records from all those machines became part of those 500 boxes of documents seized during the raids, and the IRS and the Comptroller's Office have been trawling through them. So far, an early analysis by IRS Special Agent James Neff reflects that the Yassines underreported their gross receipts between 2005 and 2010 by at least $7 million. That figure, he told the court, could actually be as high as $10 million.
On April 24, the Comptroller's Office froze all the family's private and business accounts, placed the clubs under full seizure, and started pulling out everything that wasn't nailed down. If the state's numbers are right, Mike's firms owe the state $426,605 in sales tax, plus another $1.52 million in mixed beverage taxes. Throw in penalties and interest, and the state is looking for $2.48 million. Selling whatever bar fixtures and leftover booze they seized may take a bite out of that debt, but there's a hitch: Turns out that the IRS is looking for $2.5 million in unpaid back taxes from the Yassines. Mike cut them a check for $134,000 in 2009, but that bounced, and according to testimony by IRS Agent James Neff, he reportedly has still not paid the $250,000 he owes for 2010.
Much of the Yassines' empire seems to have been built on sand, and their personal finances were little better. According to the feds, Steve may have been driving a Maserati and a Humvee, but he hadn't filed a tax return in four years. It's a similar tale with Mike: He didn't even have a personal bank account in the U.S., instead using the clubs to pay his personal expenses. Hell, even the University of Texas diploma on his office wall was a fake. (His attorney argued that, even if that's true, it's not a crime. "There's a bunch of Longhorns that might disagree with that," Judge Green replied.)