Former Harvey strip club operator sentenced to 20 months in prison in tax fraud case

The proprietor of a shuttered Harvey strip club at the center of a federal corruption case that ensnared relatives of the city’s former mayor has been sentenced to 20 months in federal prison for filing false tax returns, according to the U.S. attorney’s office.

Alicia Arnold, formerly of Homer Glen and a Lemont High School graduate, was charged in February 2021 and pleaded guilty in late November 2022. She was sentenced Wednesday by U.S. District Court Judge Jorge Alonso.

Arnold operated Arnie’s Idle Hour in Harvey, which billed itself as the “No 1 strip club on the South Side,” and also promoted prostitution, with the club’s exotic dancers taking customers to a back room of the establishment, court filings showed.

According to a criminal complaint filed in 2019, the club’s owner had been making biweekly payments of $3,000 and later $6,000 to relatives of then-Mayor Eric Kellogg for years to protect a prostitution racket being run out of the business.

Last December, Rommell Kellogg, brother of Kellogg, was convicted by a federal jury in a years-long shakedown scheme in which thousands of dollars were extorted from the club.

He has not yet been sentenced, according to court filings.

Corey Johnson, a cousin of Eric Kellogg, was charged with Rommell Kellogg in March 2019 and was the bagman in the conspiracy, according to prosecutors.

He collected biweekly $3,000 payments from the business and delivered the money to Rommell Kellogg, prosecutors said.

From 2003 to 2018, Kellogg and Johnson conspired to regularly demand and collect payments from the strip club based on threats the city of Harvey would potentially interfere with the club’s operations if the payments were not made, according to prosecutors.

Johnson pleaded guilty in March to a count of theft/embezzlement of government property and was sentenced to a year’s probation, according to court filings.

Arnie’s, 14701 S. Wood St., operated since 1997 and was owned by Arnold’s father. After it closed, it later reopened as Boogie Nights and was the scene of a fatal shooting in March 2019.

From 2012 through 2017, the club underreported income by more than $5 million, according to prosecutors, who sought a prison sentence for Arnold of a bit more than two years but less than three years.

Her attorneys said the 55-year-old suffers from medical problems and is the sole caregiver for her terminally ill mother. They asked for a sentence of probation, including home confinement and community service.

Prosecutors said Arnold kept a separate set of books for Arnie’s, which she inherited from her father, and that she concealed income from the business from her bookkeeper.

A relative of Arnold’s was the sole shareholder of the business and purportedly the president, but Arnold was in charge of Arnie’s, receiving near-daily reports regarding operations and making all final decisions regarding the business, prosecutors said.

Arnold concealed proceeds including fees paid by patrons, nightly payments received by the club’s dancers as well as payments made by the club’s managers, which included a percentage of prostitution money earned by dancers at the club, prosecutors said in the filing recommending prison for Arnold.

Arnold would refer to the dancers as “whores” or “hoes,” and demanded from managers information about fees they collected from customers, according to the government filing.

The government said after charges were filed and while Arnold was on pretrial release, she filed two fraudulent Paycheck Protection Program loan applications, the program meant to help businesses keep their doors open during the COVID-19 pandemic.

Instead, the money she received was used for expenses such as restaurant bills, a tattoo parlor and payments to family members, prosecutors said.

Prosecutors said Arnold had no prior criminal history.

“Arnold’s fraud was brazen. Her entire goal was to evade paying taxes so that she could increase the amount of money she earned from the business” and encourage prostitution at the club, prosecutors said.

The concealment of revenue from the IRS is “a slap in the face to every honest business owner who faithfully reports their entire business income and pays the full amount of taxes due,” the government said.

Arnold’s lawyers said she is diagnosed with anxiety, depression and post-traumatic disorder, and has been the victim of violent crimes.

Arnold “has accepted responsibility and has displayed extreme remorse,” her attorneys wrote in seeking leniency.

Her attorneys said Arnold moved to Las Vegas in 2019, and her 83-year-old mother lives with her. They said that Arnold is not married and has no children.

In the criminal proceeding against Rommell Kellogg and Corey Johnson, Eric Kellog was not named, though prosecutors noted Rommell Kellogg and Johnson “served in high-ranking positions in Harvey government.”

After 16 years as Harvey mayor, Eric Kellogg left office in spring 2019, barred from seeking reelection in that year’s mayoral contest due to term limits. Replacing him was attorney Christopher Clark, who had played a key role in getting the term limits law passed.

According to the complaint against Rommell Kellogg, a longtime manager of the strip club told authorities in 2017 that he had made payoffs to Johnson about every two weeks for several years.

The manager told authorities that in about 2003, the club’s then-operator told him Mayor Kellogg had demanded a payoff of $3,000 a month to allow prostitution to continue.

Johnson was also hired at the time by the club to work security on orders of the mayor, according to the complaint.

Over the next five years, the manager told authorities, the club’s then-operator complained several times about the alleged monthly payments to Rommell Kellogg.

Then in 2007 or 2008, the operator said the mayor had demanded the payoffs be doubled to $6,000 a month, the manager told authorities.

The operator refused to pay up, and Harvey police shut down the business three separate times over the next week, the manager told authorities.

“Tell your boss to just pay the man,” a Harvey police officer said during the third visit, or words to that effect, according to the complaint.

After that, the operator agreed to pay $6,000 a month in bribes, the manager told authorities.

After agreeing to cooperate with law enforcement in 2017, the strip club manager wore a hidden wire as he made his payoffs to Johnson between October 2017 and May 2018, prosecutors alleged.

Employees would use code words such as “pizza” and “rent” money to refer to the regular payoffs, authorities alleged.

In 2017, when the club was briefly shuttered after a law enforcement raid, Johnson told the manager that they would no longer have to pay, as long as the prostitution ended, according to the complaint.

About a week later, the club reopened without the prostitution, but Johnson and the others soon began demanding payments again, the charges alleged.

According to Johnson’s plea agreement, more than $500,000 was paid by the club to Johnson, although some of that money was provided to the club by the FBI after the club manager agreed to cooperate with authorities.