That Time the U.S. Gov't Tried (and Failed) to Run a Brothel

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Reno, Nevada Nightlife
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A viral story circulating since 2008 casts doubt on the wisdom of taxpayer-funded industry bailouts by pointing out that the U.S. government seized Nevada's Mustang Ranch brothel in 1990, tried to run the business, and failed.

Status: False


Email contributed by Delaney T., Dec. 16, 2008: "The Mustang Ranch and $750 billion bail-out 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. Now, we are trusting the economy of our country and 850+ Billion Dollars to a pack of nit-wits who couldn't make money running a whore house and selling booze. Now if that don't make you nervous, what does???"


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.

Various sources persist in claiming that the IRS itself ran the brothel in the interim, though the available evidence suggests otherwise. Just two weeks after the government took possession of Mustang Ranch, county commissioners banned prostitution there, saying they were tired of the "circus" surrounding the case. The ban remained in place until the business reopened in December 1990 under "new" ownership (unbeknownst to officials at the time, the original owner, Joe Conforte, had repurchased the Ranch under an assumed name).

So, while it's accurate enough to say that the federal government "owned" Mustang Ranch for approximately three months in 1990, the claim that government officials tried to run the brothel and failed appears to be unfounded.

Source and further reading: Uncle Sam Won't Get Chance to Run Brothel, Associated Press, 22 September 1990