Mary Spicuzza, and John Diedrich

Milwaukee

Milwaukee officials were stunned to learn Monday that a prominent area strip club owner, who has been battling the city to put a club downtown, was indicted in a racketeering case in California.

Milwaukee leaders say they had no idea Jon Ferraro, the Silk Exotic owner who recently received a settlement of nearly $1 million in taxpayer money following a legal battle with the city, was indicted in federal court in California early last year as part of a case involving money laundering and cocaine dealing. The FBI investigation originally targeted the Russian mob operating in the United States.

Ferraro's indictment in the case, which stretched from coast to coast, was first reported Monday in the Milwaukee Journal Sentinel.

"The indictment just floored me. I had no clue that Jon allegedly was involved in all this stuff," south side Ald. Mark Borkowski said. "Needless to say, when I saw the article, my teeth fell out."

Several city officials said if Ferraro is convicted in the case, it could cost Silk its existing liquor license in Milwaukee and prevent him from getting approval to open a club in downtown Milwaukee —- something he's been fighting to do for years.

"If he's indicted and found guilty, he obviously won't be able to have a license. It would be revoked," said Ald. Michael Murphy, who represents a west side district. "But you're still innocent until proven guilty."

Milwaukee strip club owner indicted in California

Murphy said he called the city attorney's office Monday morning to discuss the situation.

Deputy City Attorney Adam Stephens, who has been defending the city in Silk litigation for years, said he too was unaware of the indictment.

"It's eye-opening to say the least," Stephens said. "Obviously we are interested in the information. As the information becomes public and is relevant, we'll review it."

Stephens said a conviction could lead to the loss of a liquor license or denial of an application, but he said charges alone are not enough to pull a license or deny one. Stephens also noted that if a limited liability company holds the license, as is the case with at least one of Ferraro's strip clubs, someone getting convicted would not necessarily lead to the revocation of a license. However, the person convicted could not be associated with the LLC, he said.

Borkowski, the only alderman to vote against authorizing the nearly $970,000 payment to Silk when the issue went before the Common Council last month, said even being associated with such a case "doesn't bode well for Jon at all."

"The type of business is going to come in, because constitutionally it can. But I think the jury is out now if Silk and Jon Ferraro can do it, because this whole indictment now poses a ton of questions," Borkowski said. "We're going to get that kind of gentleman's club downtown sooner or later. But who runs it is now wide open."

Ald. Robert Bauman, whose district includes much of downtown, said he needs more information before commenting on what it means for Ferraro and the city.

"I just have to see how this plays out," Bauman said.

"I don't think that anybody on the council had any thoughts of him having ties with the Russian mafia or anything like that," said Ald. Tony Zielinski, chairman of the city's Licenses Committee. "That's probably the biggest shock of the last five years."

He added that from a licensing perspective, city officials consider things like the character and criminal history of applicants.

"If this stuff bears out like it's being reported, that's definitely going to be a factor —- a very negative factor —- in an application for a public entertainment license," Zielinksi said.

Mayor Tom Barrett declined to comment. Common Council President Ashanti Hamilton and other aldermen could not be reached for comment.

Investigation dubbed 'Russian Laundry'

Details about the California case, which was dubbed “Russian Laundry,” became public more than a year ago. But Ferraro’s role in the scheme had not been previously disclosed.

The charges against Ferraro were revealed in a sealed cellphone tracking warrant that became public in federal court in Milwaukee and was obtained by the Journal Sentinel. The warrant has since been re-sealed.

Ferraro was charged in a 132-count indictment handed down Feb. 24, 2015, by a federal grand jury in San Francisco, according to the warrant filed in Milwaukee.

The indictment named “Jonathan Ferraro and eight other individuals for violations of ... racketeering conspiracy ... money laundering conspiracy and related offenses,” according to the warrant.

The warrant indicated nine individuals were indicted but one defendant in the case was a company, which is not unusual in a racketeering case. The warrant does not say how many counts Ferraro was charged with — or which crimes.

So far, six people have been convicted in the case and two sentenced. Charges against the others are pending.

When documents in the racketeering case became public in San Francisco in March 2015, names of seven of the eight men charged were listed on the indictment. Ferraro was not among them. The name of one defendant had been removed and was referred to only as “under seal.”

It is unusual for the identity of someone who has been indicted to be shielded for so long. The Journal Sentinel could not verify the defendant listed as “under seal” is Ferraro, or determine why his name does not appear on the docket in the California case.

Legal experts say the fact that Ferraro’s name has not been publicly disclosed could indicate a couple of things: In some cases, the defendant may be a fugitive, but that does not appear to be case with Ferraro. Or he could be cooperating with federal law enforcement.

In such cases, charges against the person who is helping agents may be dropped or the person may be convicted of a lesser charge.

Federal prosecutors in San Francisco and Milwaukee have declined to comment, as has the FBI.

Ferraro did not return calls for comment. Michael Hart, a Milwaukee defense attorney, acknowledged that he has been retained by Ferraro but declined to elaborate. Hart did not immediately return a call for further comment Monday.

In his lawsuit against the City of Milwaukee, Ferraro successfully argued that the ordinances used to reject Silk’s license applications were unconstitutionally vague, and the court agreed. The jury awarded a company led by Ferraro $435,500 in damages.

The city appealed. After Ferraro won again at a federal appeals court, city officials agreed last month to approve a nearly $970,000 payment from taxpayers. That amount included damages and interest as well as Ferraro’s attorney’s fees and expenses.

While Ferraro won the lawsuit, he still hasn’t received approval to open a strip club downtown as the city continues to deny his requests. Ferraro has a second pending lawsuit in federal court and has said he will continue to fight for a downtown location.