Mr. S.O.B.

Rick's CEO Robert Watters wants to make sexually oriented businesses respectable. So why, in his adopted hometown, does he get no respect?

The ramshackle white building with a blue door sat in the shadows of the Galleria, at the business end of a mostly residential neighborhood. Across a field was the planned site of the Men's Club, a topless bar that would cater to suit-wearing men with credit cards.

Thanks to an unseen benefactor, the scruffy little building at Fairdale and Rice became a Pentecostal church. "We had been praying for help, and we were very thankful," says Jorge Garay, an elder of the Iglesia Misionera Pentecostes.

God indeed works in mysterious ways. In 1989, Robert L. Watters -- owner of Rick's Cabaret, Houston's highest-profile topless bar -- paid the building's rent for the church. He was attempting to thwart the Men's Club, a potential competitor, by forcing its chosen site into violation of Houston's licensing laws. If the club's proposed spot were too close to a church, it would run afoul of the city's sexually oriented business ordinance.

Watters is proud of his ruse. He says he was driving one day when he saw the First Hispanic Pentecostal Church and got the idea to stop in and ask if its members wanted a second outpost. Pentecostals generally frown on topless bars, but the church didn't quibble over the Lord's funding mechanism. The rent was paid, and who paid it wasn't an issue. Seven years later, the Iglesia Misionera Pentecostes boasts about 100 members.

"Isn't it a wonderful thing to have created?" asks Watters with a sly smile.
He, too, was blessed. His competitor's license was postponed -- at least, until Houston Police Department vice officers discovered his connection to the new church.

It was a clever manipulation of the law, and a strategy that reveals much about Robert Watters. The balding, bespectacled 45-year-old lawyer hopes to be at the forefront of a major change in the lucrative topless industry. Watters wants to tame and upgrade topless bars; to titillate in a clean, expensively furnished room; and to make Rick's a nationally recognized brand name with branches across the country.

If any topless club can accomplish that, probably Rick's can. The club was one of the first in the country to take topless dancing upscale. It markets itself as a businessman's hangout, a place where white-collar guys can cut deals while ogling beautiful women. Rick's has been featured in men's magazines and TV shows, and in Houston, it ranks easily as the city's most famous sexually oriented business.

Last fall, Watters dragged topless dancing up another notch in respectability when he successfully had Rick's Cabaret International Inc. listed on the NASDAQ Small Capitalization market. It was the first topless club to be listed on a stock exchange, and its shares hover around a healthy $5 1/4 apiece. (Watters, now CEO, retains a controlling ownership.)

In his quest to gentrify the topless business, Robert Watters has rankled many -- especially those in his own back yard. He is described in unflattering terms by the police and regulators who keep an eye on his business. He and Rick's have been the targets of numerous lawsuits, many of which pitted partner against partner. And since making public his plans to open a Rick's near tony Southampton, he's attracted the wrath of neighborhood groups, city councilmembers and even his own industry.

In general, Watters has countered opposition with shrewd, lawyerly end runs, such as his support of the Iglesia Misionera Pentecostes. But his smooth moves have not earned him an adoring public. He's helped make Houston one of the world capitals of topless dancing, but the city shows no gratitude. Since announcing Rick's new location, Watters laments, "I've become Public Enemy Number One."

Even by the standards of oil-boom Houston, Salah Izzedin, the Lebanese oil man who brought Watters to Rick's, entertained extravagantly. His Post Oak townhouse's foyer was extraordinary; his indoor pool was magnificent; and a sumptuous feast was often set at a mammoth dining table for sports stars, River Oaks types and others. One partygoer recalls that the predatory-looking Izzedin would program the numbers of dozens of topless dancers into his phone and call them one by one, addressing them as "Shweetie" and inviting them to his soirees.

As the night was ending for staid attendees, serious partiers headed upstairs. An oft-invited guest recalls climbing the curved staircase, mirrored on the sides and underneath, to offerings of cocaine and pliable women. (Izzedin, who did not respond to attempts to reach him for this story, has denied lawsuit charges that he was involved in drugs and womanizing at Rick's itself.)

Watters never attended the oil man's parties, but even so, Izzedin's flashiness must have come as a shock to the tax-law specialist, a Canadian citizen with an impressive resume. In 1973, he received a bachelor of law degree from the London School of Economics; in 1975, he graduated with a taxation law degree from the Osgoode Hall Law School in Toronto. In London, he qualified to be a solicitor and practiced law.

In 1979, Watters moved to boomtown Houston with his then-wife, Claudia Heater, who'd been raised in Italy. Watters explains that his wife wanted to explore her Texas roots; her grandfather lived where the Lakeside Country Club is today.

He first worked as a tax-law specialist at the Houston office of Touche, Ross & Co. (one of the predecessors to Big Eight accounting firm Deloitte & Touche). Although still not licensed to practice law in the United States, in 1981 he joined the Houston law firm Hollrah, Lange and Thoma. (Because the Texas bar does not accept credentials from foreign law schools, Watters was forced to take the notoriously difficult New York State bar exam. He passed it in 1984.)

At Hollrah, Lange and Thoma, Watters began growing cool toward the practice of law. His practice was becoming more generalized, less fun; he remembers getting "six o'clock headaches." But it was at the firm that Watters met Izzedin, a client with international banking problems. As a knowledgeable insider sums up the situation, Watters "was just an unlicensed attorney doing a little legal work for a guy who was spending the money his mother made in oil."

In 1982, Izzedin opened Trumps, a mainstream nightclub at 3113 Bering -- eventually the site of Rick's. "Trumps was to be a young and upscale supper club and disco," says one of Izzedin's then-partners, publicist and social force Becca Cason. The other Trumps investors included more society-column mentionees: oil broker Nick Florescu; Michel Lakhdar, owner of Chianti restaurant and the Martini Bar; and Steve Wyatt, Lynn Wyatt's son whose "friendship" with Sarah Ferguson later caused a stir on two continents.

Despite the society types involved, Trumps faltered. First the lunches failed; then the whole enterprise fizzled. Izzedin formed a new partnership, this time with J.B. Gentry and Dallas Fontenot, who'd come up through the ranks of topless bars. The three converted the Trumps club and corporation to run an upscale topless joint at the same location. Izzedin got Watters to do the legal work.

Before the conversion was complete, Fontenot was at the unnamed club-to-be when an out-of-towner climbed out of a cab and asked whether "Rick's" was open yet. The name struck the owners as a good one, conjuring images of Casablanca, Bogart and the club where, sooner or later, everybody winds up.

Thus christened, Rick's opened in 1983 with classy-looking marble floors, valet parking and a substantial menu; fresh-looking topless dancers paid a fee to work there and kept the cash they collected from the customers. The formula succeeded wildly. The club boasted top liquor sales in the city and state. Big spenders dropped $8,000 a visit; some parties approached $20,000.

As sure as the club became wildly successful, it also spawned a snake bed of attacks, counterattacks and lawsuits between the partners. First Gentry exited, leaving Izzedin and Fontenot with 50 percent each. Only in 1987 did Watters enter the partnership: in exchange for his work obtaining Rick's sexually oriented business license, Izzedin and Fontenot each gave him five percent of the club. (Later Izzedin would question whether he even deserved that much.)

Watters, who came to the business through Izzedin, joined Fontenot in attacking the oil man. Watters and Fontenot alleged that Izzedin sexually harassed the waitresses and performers at Rick's, encouraged them to take drugs and engage in prostitution. In a 1988 deposition Watters alleged that Izzedin dated many of the women who worked at Rick's. An opposing attorney asked Watters, who had divorced his first wife, whether he wasn't in fact dating a Rick's performer at the time. Yes, Watters replied. "The first stone is a lot different than 99 stones, though."

(Watters eventually married and divorced that topless dancer, Gweena "Gigi" Smith. His third and current wife, Tammara Brasher, is also a former performer, and is younger than either of his first two wives. "I don't think I could have a long-term relationship with someone who hasn't danced," he says; no one else could understand his business.)

In the end, Izzedin left Rick's and went to Dallas to open the opulent topless club Cabaret Royale. There he garnered some great publicity, then ran into trouble with the U.S. Department of Labor. He is no longer listed as an owner.

After Izzedin's exit, Watters and Fontenot split Rick's 50-50. As partners, they made a strikingly odd couple. Watters was a cool-headed, somewhat aloof attorney given to conservative suits; Fontenot was heavyset and emotional, and preferred Hawaiian shirts. Watters read books about management techniques; Fontenot put his arm around employees.

Some say that Fontenot was the idea man, and Watters was simply a behind-the-scenes business operator. Even Watters credits Fontenot with conceiving great strategies. For instance, it was Fontenot who thought up Rick's VIP Room, the luxurious private balcony accessible only to those who pay membership fees; and Fontenot who thought to pay cabdrivers and hotel concierges commissions to steer customers to Rick's.

Watters and Fontenot planned a series of clubs, and together opened the Colorado Bar & Grill, another high-concept topless spot. But eventually their different styles led to a serious rift and another round of litigation. Fontenot took the Colorado, which has sometimes outstripped Rick's in business, and Watters became the sole owner of Rick's. In ten years, he'd gone from being merely a consulting lawyer to owning the joint.

As might be expected, Watters spends a lot of time in court -- though not in his capacity as a lawyer. He's sued his partners, been sued by his partners, been sued by former performers, been sued by people who were never in the bar but want to hold it responsible for the actions of an employee after work, and been sued by a guy who was shot in a robbery outside the Colorado. Rick's has been investigated by the I.R.S. and the U.S. Department of Labor, and has had to pay more than $250,000 in back taxes to the TABC. In 1991, Harris County sued Rick's, along with other clubs, and settled for an agreement that sexually oriented businesses would form a local organization to "set reasonable standards of conduct in the sexual entertainment business."

Watters has also filed two divorces in Harris County, and was a third party to yet another divorce. In that case, he declared paternity for the child of Tammara Brasher, now his third wife. (The child was born in Hawaii, where Watters took a sabbatical of sorts and started writing a science-fiction novel.)

Watters seems to relish the strategic maneuvers involved in legal tangles, though occasionally those machinations reveal his blind spots. In 1989, for instance, Watters and Fontenot marched a dozen Rick's dancers into court. State District Judge Mark Davidson was navigating a thicket of mismanagement accusations against the club, and the partners hoped to convince him not to appoint a receiver.

On the stand, a pretty teenager testified that if the court forced Rick's into receivership, she would pass up the thousands of dollars she made dancing topless each week rather than work for anyone but Watters and Fontenot. The dedicated employee told the court that she would consider finishing high school instead.

Not surprisingly, the judge was not swayed. He appointed a receiver, and it is unknown whether the dancer returned to school.

So went just one chapter in one of the longest of the Rick's-centric lawsuits; it started in 1987 and was finally settled last month. The suit was filed by Vernon Young, who claimed to be a silent but original investor in Rick's, and who wanted a cut of the profits. The allegations included till-skimming and mismanagement of corporate assets. Says one investigator, "I don't know who was stealing from whom or if everybody was stealing from everybody." A report in the court's file indicates that at least $850,000 in cash was skimmed from the club, presumably by three bartenders, in just the eight months auditors monitored.

On St. Patrick's Day 1989, now-state District Judge Michael Wood was put in control of the club. Wood -- who previously acted as the receiver for Gilley's club in Pasadena -- removed Watters and Fontenot from the management of Rick's.

But the pair did not surrender, and in July, the general manager of the club locked Wood out of Rick's. Watters and Fontenot had retaliated by filing bankruptcy for Rick's. It was another ingenious use of the law: because the federal bankruptcy superseded the state action, the unwelcome trial date was postponed and the unfriendly receiver was gone.

Rick's emerged from bankruptcy a few short months later, and the state court appointed a second receiver, Scott Mitchell. Business owners usually detest court-appointed receivers, but Watters apparently liked Mitchell. Years later, Watters made him one of the officers of the new NASDAQ-listed Rick's corporation.

The litigation that brought Mitchell to Rick's showed not only Watters' skillful manipulation of the legal system but also his nerve. Judge Davidson sanctioned Watters and his attorney for, among other things, postponing Watters' deposition on a day that Watters was scheduled to meet Lifestyles of the Rich and Famous host Robin Leach.

Watters was sentenced to perform 20 hours of community service, an obligation he met by combining charitable ends and topless-bar means. First, he spent eight hours familiarizing himself with Cocaine Anonymous and Alcoholics Anonymous, and writing a memo to Rick's employees about the programs.

Second, he used three hours to learn about the End Hunger program and ordering Rick's kitchen to send its extra food to the charity. Third, he spent nine hours arranging for Rick's dancers to gather contributions for Jerry Lewis' muscular dystrophy telethon. In a letter to the judge outlining these "community services," an unabashed Watters also mentioned his support of the Iglesia Misionera Pentecostes -- and even admitted that his motivation was to stymie a competitor, rather than to grow nearer to God.

In 1994, Watters opened Tantra, an after-hours bar. According to Rick's prospectus, Tantra is a "non-sexually oriented discotheque and billiard club." But "sexually oriented" lies in the eye of the beholder.

This April, computer programmer John Hu went to Tantra to unwind after working a night shift. While in the men's room, he thought the chest-high mirror over the urinal was a bit odd. When he came out, he was mortified to find that it was a one-way mirror. Clubgoers were gawking, laughing and making comments like "You're not as big a cowboy as you pretend, are you, fella?"

So says Hu's attorney William Emmons, who sued Tantra and its owner, Rick's Cabaret International Inc., for invasion of privacy, infliction of emotional distress, deceptive trade practices and breach of contract. The defendant responded, shamelessly, that the one-way mirror "adds to the decor and ambiance of the nightclub." The suit is still pending.

Watters has weathered other Tantra-generated woes. This January he was arrested in a police raid because Tantra allegedly lacked a necessary dance hall permit; the case has since been dismissed. The city of Houston also protested the club's liquor permit, though the club seems in no danger of losing its license. But according to the Texas Alcoholic Beverage Commission, the one-way mirror has to go; TABC rules prohibit exposing people's genitals in clubs that serve liquor.

Tantra has actually became more controversial in its neighborhood than the nearby Rick's. It's not just the strange outfits seen on the street the nights of Tantra's S&M Ball, say neighbors. It's having people drinking in cars and roaming the area starting at 2 a.m.

"I rarely sleep all the way from 3 a.m. to 5 a.m. on a weekend night anymore," says Janice Aikman, who lives about a block from the club. "Since Tantra opened we've had people passing around a joint in our driveway at 3 a.m. I've seen a woman crawling on the ground drunk and vomiting with her skirt hiked up .... People drink in their cars and toss out the bottles. People urinate in our yards. We are constantly finding condoms, and one Sunday morning we found a body up against our back gate. We didn't know if he was dead or passed out." The clubgoer wasn't dead, but Aikman still wasn't happy.

In August, Watters spoke to a Council committee meeting armed with two props: one guaranteed to annoy fellow operators of sexually oriented businesses, the other guaranteed to annoy City Council. The first prop was a portable stand on which topless dancers could perform. Watters suggested that the city require it, since it would allow vice officers to tell at a glance whether patrons were within touching distance of dancers; other clubowners have not endorsed it, possibly for the same reason. Watters' second incendiary prop was a legendary three-year-old videotape that allegedly shows vice officers pulling Rick's dancers toward them.

Councilman Jew Don Boney responded with a little speech about maligning the police force, and Watters exchanged bitter words with Councilwoman Helen Huey. "In the first place, I think your attitude is deplorable," he told Huey, losing his temper. He felt he was providing a valuable service to the committee, and he expected Council to appreciate the insight he offered into vice activities. "I would have thought you would have been delighted."

The hearings on strengthening the sexually oriented business ordinance coincided with the uproar over Rick's proposed new location in the 2500 block of the Southwest Freeway. Watters announced the new location this summer, when a lawsuit threatened the club's ownership of its Bering Drive property. The new address, between Kirby and Shepherd, would place Rick's in what might at first seem compatible surroundings: the club would fall between Magic Island and Hooter's.

But opposition rallied quickly. The new location met with objections not only from wealthy homeowners in nearby Southampton, but also from business owners on Upper Kirby, and even activists in West University, which lies at least a mile from the location.

The neighbors voiced concerns about traffic, drunk drivers, their children wondering about the business, their land values, and more sexually oriented businesses following Rick's to the area.

Naturally, representatives of the groups angered by the new Rick's location formed a particularly eloquent and powerful block to lobby City Hall. "Such a move poses an immediate threat to my family," Karen Payne, a Southampton resident, told the committee. "Protect our neighborhood, our children and the quality of our family life."

Watters' timing irked his fellow operators of sexually oriented businesses. "It was bad judgment to create the hullabaloo over the new Rick's location," says Bob Furey, who once managed Rick's and is now associated with the Colorado. And Watters' performance in front of City Council did nothing to repair that rift.

Rick's is high-ceilinged and opulent, a place where pretty young women, always without tattoos, dance topless on stages scattered throughout the main room. These same beauties will dance at a patron's table for $20 cash. (The most comely dancers can take home about $2,000 a week after working anywhere from three to five nights.) The atmosphere is sybaritic, but with the sensibility of a high-class restaurant. The decor includes state-of-the-art sports screens, statues and Windsor chairs.

Though Rick's is hardly family entertainment, it's a far cry from raunchier sexually oriented businesses, including some in Southampton's own back yard. Some months ago, in the same block as the new Rick's site, a Southampton-area doctor waited in the lobby of a "tanning salon." He was amazed when two incensed teenagers entered the establishment and demanded their $60 back; they explained that they expected oral sex but didn't get any. The teens left quickly when a Rambo-like man with several guns strapped to his body came to handle customer complaints.

Stunned but curious, the doctor paid his $40, was handed a bottle of mineral oil and a washcloth, and told to strip and wait in a little room. A young woman came back naked and danced in front of him for 20 minutes. The doctor didn't ask what services would be provided for more money, but he says it was clear that there was more on the menu.

That "tanning salon," which has now left the location, was not the subject of picketing and a lobbying effort by its neighbors. Kathy Easterly, an area resident, says she called the police about it and was told that officers would not remove their clothes to investigate. The matter was left at that.

The people of Southampton seem equally accepting of MidCity Video. Just a block from the new Rick's location, it rents films such as Anal Hellraiser, Sodo Mania III and More Dirty Debutantes. Easterly says people from the neighborhood simply don't rent there.

And across Holcombe street from West University, a neighborhood that has chimed in to oppose the new Rick's, sex magazines fill the lobby of the Gaslight Newsstand. For $5 a man can enter a dark warren of little rooms with black walls and black benches; adult movies play constantly. One arrest this year involved the use of a "glory hole," which allows a man to put his penis through a hole in the wall to have anonymous sex.

Again, the Gaslight is not the focus of the neighborhood uproar, picketing and speeches at Houston City Hall. "I think what happens is that people do not know what goes on in these places," says Harris County District Attorney John B. Holmes Jr. "At first I had no idea what went on in a 'tanning salon.' If you get people like a prosecutor who doesn't know about it, what do you think a housewife or oil company executive will know?"

Club owners have complained to City Council that the vice squad spends too much time and money policing the upscale topless clubs while ignoring the bottom-feeding sexually oriented businesses. Watters and other club owners claim that vice officers spend thousands buying drinks and table dances to arrest a few dozen women, who mostly either get off scot-free or receive deferred adjudication. (Vice officers say the arrests cost only $59 each.)

According to recent City Council discussions, police officers have a hard time making arrests at the various modeling studios, tanning salons and massage parlors that require patrons to remove their clothes. HPD Chief Sam Nuchia says that the present state law basically requires an officer to engage in prostitution to make a case. "What it would require in behavior is sometimes more reprehensible in itself than what you are regulating," says Nuchia.

The obvious irony is that more obvious, more acceptable places such as Rick's become targets not just for the neighbors, but for the vice department.

Watters notes that his fractious relationship with the police is only natural. He believes that vice officers demonize the owners of topless clubs in order to define themselves as heroes: "In other words, they're the good guys, and we're the bad guys." When a sexually oriented business operates not only within the law, but in a classy way, Watters says, vice officers grow uncomfortable: "If we stand up looking like good guys, what does that make them?"

Certainly Nuchia does not see Watters as one of the good guys. "They are pimps and panderers, and they know it," the chief recently said about owners of sexually oriented businesses. Asked if he thinks Watters in particular knows he's a pimp and panderer, Nuchia said yes. But at the end of the same interview, the chief said, "Strike that," noting that he doesn't need any more lawsuits.

"When I lived in Southampton," says Watters, "one of the curious things was that I saw most of my neighbors in Rick's when I first started getting involved with Rick's. I still occasionally see some of them. And these are all, as far as I could see, good family people. Stable homes. Businessmen." Watters, who now lives with his family in Montrose, suspects that "one or two" opponents of his new location are wives angry that their husbands would have even better access.

Despite neighborhood opposition, Watters is proceeding firmly with his plans to move and expand. "I know that we push some buttons. We are taking something that has existed in time immemorial in society, and we are bringing it out in the open. We are saying there are limits to it, that you can come in here and be sexually stimulated by the appearance of a young girl, that you have a drink and have some conversation with her, and it can stop there."

He is scheduled to open a new two-tiered Rick's on Bourbon Street in New Orleans around December. To attract couples, part of the club will feature a floor show like those seen in Paris cabarets -- a show with dancing girls, magicians and comedians.

He is also in the final stages of acquiring a club in downtown Minneapolis, and plans to transform it into a Rick's modeled after the one in Houston. His next target is the Las Vegas strip, where he thinks the floor shows could use a little work. Compared to the approach Rick's will take in New Orleans, he says Vegas' "sex is more 'Broadway,' more disguised and diluted."

During the last six months, as Watters has traveled the United States, expanding his company, he has considered moving to a friendlier city, leaving behind the one that made him rich, but that also refuses to embrace him. "The level of hypocrisy in Houston concerning these issues is just staggering," he says angrily. "I go to New Orleans, and they give me an honorary citizen certificate. I come back home to Houston, and the police chief calls me a pimp and a panderer.

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