Nightclub suit kept under wraps

When Seattle Mayor Greg Nickels submits new rules for nightclubs to the City Council, his proposals will reflect the advice of a task force that included Stephanie Dorgan, owner of the popular Crocodile Cafe in Belltown.

Dorgan's reputation made her a logical choice: longtime owner of the venerable Crocodile; married to legendary guitarist Peter Buck of R.E.M.; former attorney-turned-successful businesswoman.

What isn't included on that list is a 1992 lawsuit in which Dorgan's own business partners accused her of failing to keep proper financial records and alleged that cash receipts disappeared under suspicious circumstances.

The suit vanished from public view almost as soon as it was filed. Dorgan settled the case in less than a month and persuaded a court commissioner to seal the entire file.

Dorgan's lawyer argued that the file should be sealed because she was an attorney and her reputation would be harmed if the allegations were to become known to others.

That argument didn't meet the legal standard for sealing a court case, but Dorgan benefited from a system in which judges and court commissioners in King County frequently overlooked the rules, often for attorneys, and improperly sealed hundreds of cases.

Of 420 civil suits sealed in King County Superior Court since 1990, judges and commissioners have sealed at least 58 cases where a fellow lawyer is a party, usually as a defendant. Leading firms, prominent lawyers, judges — all have had files about them hidden from public view.

Dorgan's case was among that group. A judge unsealed it Aug. 5 at the request of The Seattle Times, which has filed motions to open dozens of sealed cases.

The case reflects how legal secrets can be hidden for years, in this instance keeping Nickels from even knowing about the lawsuit when he named Dorgan to an important task force.

The complaints in the case also were kept from the Washington State Bar Association, which oversees lawyer discipline, and the state Liquor Control Board, which regulates nightclubs.

The state bar association wants to know about such cases, said Judy Berrett, the association's spokeswoman. "Then we can investigate," she said.

The bar also would discourage lawyers from using their status to try to seal files in which they are parties, she said.

"We would err on the side of wanting to know," Berrett said.

Liquor board spokesman Bob Burdick said the Crocodile suit would have been of interest.

"If a business is not being run properly, if there are either criminal or civil issues how it is being operated, then that information could be germane," he said.

Task-force contributor

Liquor board records show the nightclub has been issued one violation, six written warnings and three verbal warnings since 1994, mostly for minor problems.

A Nickels aide said that without learning more about the allegations, he couldn't comment on whether the lawsuit would have prevented the mayor from putting Dorgan on the nightclub task force.

But the mayor wants to know as much as possible about those he chooses for a task force, said James Keblas, the director of the mayor's film and music office.

"I do know that Stephanie Dorgan is a well-respected business and nightclub owner in this community," Keblas said, adding that she was a "great contributor" on the task force.

Dorgan, 46, didn't respond to numerous phone messages left with her office and others, but denied the allegations in court documents filed in 1992.

In a 1993 interview with The Times, Dorgan noted a similarity between operating the Crocodile and being a lawyer. "You still have to comply with the law," she said, citing small-business regulations and liquor laws.

Dorgan was one of 15 club owners and neighborhood activists chosen by Nickels last year to help write licensing rules for nightclubs, including what actions should be taken against problem clubs.

The task force recently submitted its recommendations to the mayor's office, which has not made them public. Nickels is expected to propose an ordinance to the City Council this fall.

The issue has stirred controversy, pitting proponents of a vibrant entertainment scene against critics of noise, illegal conduct and rowdy behavior.

Dorgan's role at the Crocodile dates to its opening, when she served as its general partner.

At the time, her name was Stephanie Walton, from her marriage to a fellow lawyer. She resumed using her maiden name after they divorced in 1993.

Confidential settlement

Dorgan gave up lawyering to run the club. But she landed in court when two partners, Jerold Everard and Erickson Shirley, sued her Aug. 28, 1992, accusing her of failing to maintain proper accounting records.

The suit accused Dorgan of failing to keep records of cash receipts from live-music admission fees, of the sales of cigarettes and T-shirts, and of revenue from pinball machines and a pool table.

Everard and Shirley presented the court with a detailed affidavit from the president of a cash-register company who examined the club's nightly cash-register reports.

"Money is coming into the Crocodile Cafe's cash registers and is not being reported on the closing reports," he wrote.

"Of the many theft investigations I have done, the types of manipulation of the cash registers evident here are typical ways in which cash registers are manipulated to steal cash."

In another affidavit, Everard said Dorgan had acknowledged to him that she kept "iffy" books, which she refused to let him see.

An accountant who looked at the records wrote in an affidavit that he had "serious concerns regarding the integrity" of the club's books.

On Sept. 21, 1992, Dorgan's attorney informed the court that a settlement had been reached. He then obtained the sealing order, arguing in court papers that Dorgan and her then-husband were attorneys and that the allegations "present risks of substantial negative effects to their personal and professional reputations."

Both "vehemently deny the truth of each of these allegations," the attorney wrote.

The terms of the settlement were confidential, but Dorgan bought out the other investors.

Everard went on to open other clubs and also was appointed by Nickels to the nightclub task force.

Shirley couldn't be reached, and Everard said he couldn't discuss the settlement.

Everard said he didn't speak to Dorgan for about 10 years but that their work together on the task force required that they "put some of this behind us."

Steve Miletich: 206-464-3302 or smiletich@seattletimes.com

Staff reporters Ken Armstrong and Justin Mayo contributed to this report.