RCI Hospitality Hit With Lawsuit Over Tax Fraud Allegations
Investor action follows a September indictment by the New York Attorney General alleging a multi-million dollar bribery and tax evasion scheme.
RCI Hospitality Holdings (NASDAQ: RICK), the Houston-based operator of nightclubs and restaurants, is facing a class-action lawsuit alleging the company misled investors about its legal and financial risks. The legal action follows a sweeping indictment in September by the New York Attorney General that charged senior executives, including the company's CEO, in a multi-million dollar tax fraud and bribery scheme.
The lawsuit, announced Tuesday by the law firm Bragar Eagel & Squire, P.C., claims that RCI Hospitality made materially false and misleading statements and failed to disclose significant legal risks. The action seeks to represent investors who purchased shares between December 15, 2021, and September 16, 2025.
The legal turmoil stems directly from a 79-count indictment unsealed on September 16, 2025. The that RCI executives, including CEO Eric Langan and CFO Bradley Chhay, engaged in a scheme to avoid paying over $8 million in state and city sales tax. The indictment accuses the company of bribing a former state tax auditor with lavish trips and thousands of dollars in cash and club-specific currency to conceal the tax liabilities.
In a statement following the September indictment, and stated its intent to "vigorously fight the charges in court." The company has not yet issued a public response to the subsequent class-action filings.
Shares of RCI Hospitality showed modest gains in Tuesday trading, rising 3.4% to $28.21. However, the stock remains under significant pressure, trading near its 52-week low of $25.15 and well below its 52-week high of $61.33. The company’s market capitalization currently stands at approximately $238 million.
The investor lawsuit argues that the defendants’ public statements were rendered misleading by their failure to disclose the alleged fraudulent activity. It claims that when the details of the indictment became public, the revelation caused a significant decline in RCI's stock price, resulting in substantial losses for investors.
According to the Attorney General's investigation, the alleged bribery scheme involved falsifying business records to hide payments to the tax auditor, categorizing them as promotional or miscellaneous expenses. The charges have introduced a high level of uncertainty for the company, which operates dozens of venues across the country, including Rick's Cabaret and Vivid Cabaret in Manhattan.
Multiple law firms have now filed similar securities fraud lawsuits, encouraging eligible shareholders to seek lead plaintiff status before a November 20, 2025, deadline. The mounting legal challenges present a significant headwind for RCI, threatening costly litigation, potential fines, and considerable reputational damage that could impact its operations and investor confidence for the foreseeable future.