Fact Check: The Federal Government Did NOT Fail In An Attempt To Run Nevada's Mustang Ranch Brothel After Seizing It For A Tax Debt

Fact Check

  • by: Alexis Tereszcuk
Fact Check: The Federal Government Did NOT Fail In An Attempt To Run Nevada's Mustang Ranch Brothel After Seizing It For A Tax Debt Not Gov't Run

Did the Federal government unsuccessfully attempt to operate the Mustang Ranch brothel in Nevada after seizing over a tax debt? No, that's not true: The U.S. government did seize the famed house of ill repute twice, but in each instance it was sold at auction. The Mustang Ranch was seized by the government in a 1990 bankruptcy proceeding in 1990 and auctioned off months later. In 1999 the Mustang Ranch was again seized by the federal government in a fraud, racketeering and conspiracy case, but again the government did not run the business.

The claim appeared as a post (archived here) where it was published on Facebook on August 23, 2015.

It opened:

BAIL 'EM OUT!!!??? Hell, back in 1990 the government seized the Mustang Ranch brothel in Nevada for tax evasion and, as required by law, tried to run it. They failed and it closed.

This is what the post looked like on Facebook at the time of writing:

Facebook screenshot

(Source: Facebook screenshot taken on Wed Dec 30 18:30:21 2020 UTC)

Amid the stimulus bill debate in Congress, the humorous claim went viral again but it is still not totally true.

The assertion that the Mustang Ranch was seized and then run into the ground by the federal government was debunked by David Emery, an urban legends researcher who worked for the website About.com and now writes for Snopes.com. Emery reported on the Ranch's seizure in 1990 that did not result in the government running the Mustang Ranch. He wrote:

While the intent of this missive is humorous and it makes a worthy point, namely that mixing government and business may create more problems than it solves, it rests on a major factual error. Contrary to what is claimed, the federal government did not attempt to operate Mustang Ranch after it was seized in a bankruptcy proceeding in September 1990.

It's true that the feds had planned on keeping the business going until the brothel could be sold at auction (a scheme that became the butt of numerous jokes on late-night TV), but a U.S. judge refused to allow the bankruptcy trustee to assume the Ranch's business license. Instead, the IRS foreclosed on the property and auctioned it off a few months later."

Emery cited as Associated Press report titled, "Uncle Sam Won't Get Chance to Run Brothel," from September 1990 for details about the bankruptcy trustee's efforts to try and run the business, which was denied by a judge.

Fast forward to 1999 and the Mustang Ranch was again seized but not run into failure by the U.S. government.

The Washington Post reported about the seizure of the Mustang Ranch in 1999:

The Mustang Ranch property was forfeited to the federal government this summer after guilty verdicts against the ranch's corporate owner in a fraud and racketeering trial."

As did the Los Angeles Times, however, it was never run by the federal government and was purchased in 2003 by developer Lance Gilman, CNBC reported.

The Mustang Ranch brothel was eligible for CARES Act funds the Reno Gazette Journal reported in September 2020.

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  Alexis Tereszcuk

Alexis Tereszcuk is a writer and fact checker at Lead Stories and an award-winning journalist who spent over a decade breaking hard news and celebrity scoop with RadarOnline and Us Weekly.

As the Entertainment Editor, she investigated Hollywood stories and conducted interviews with A-list celebrities and reality stars.  

Alexis’ crime reporting earned her spots as a contributor on the Nancy Grace show, CNN, Fox News and Entertainment Tonight, among others.

Read more about or contact Alexis Tereszcuk

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