After the first cockroaches were discovered at RCI Hospitality (NASDAQ:RICK) earlier this year, I started digging deeper and discovered a troubling relationship between RCI CEO Eric Langan and a construction company that has received tens of millions of dollars worth of business from RCI. Numerous red flags, including issues with security at Bombshells, multiple lawsuits, and questionable capital allocation.
Some of these issues have been known though poorly covered over the past few years, but many issues were new claims that were made public for the first time. While these were all troubling discoveries that highlighted the company’s poor stewardship, the amount of capital being misappropriated in today’s discovery dwarfs all of the prior transactions.
It should be noted that I reached out to the head of IR for RCI, and I did not receive any response regarding the company's relationship with Tannos Construction, Eric Langan's ownership in Tannos Land Holdings, Ed Anakar's interest in the Tannos Land Holdings, the Board's awareness of the relationship between the company and Tannnos.
RCI has been on a construction binge the last three years. It built a brand new 40,000 square foot office building at a cost of $6 million, and has built or is in the process of building seven new Bombshells restaurants at around $3 million per location. It turns out that multiple Bombshells and the headquarters (plus some additional club remodels) were awarded to a single contractor, Tannos Construction & Development. Tannos Construction posts its projects on its Facebook page (linked in the previous sentence). I have created a Flickr page documenting the various sources here.
RCI's New Corporate Headquarters: You can see the RCI name in the bottom right hand
