COURT DENIES ABC APPEAL

The Court of Appeals of Virginia has ruled in favor of the former
Richmond nightclub Fahrenheit, upholding a previous ruling that the
club had not become a haven for drugs.

Fahrenheit, now out of business, was one of many Richmond clubs,
beginning in September 2000, that became the target of an undercover
investigation - called Operation Ex-Clubs - by agents of the Alcoholic
Beverage Control and Richmond Police to catch drug users and pushers
in local bars. The investigation resulted in a multijurisdictional
grand jury and the subsequent drug-related arrests of nine
individuals. Nearly half of them were acquitted.

Through a series of ABC hearings, agents and officers maintained that
Fahrenheit had become a "meeting place" for drug users and said the
club's liquor license should be forfeited. The ABC ruled that
Fahrenheit and other clubs acted unlawfully by contributing to or
knowing about an environment in which drugs are used and
distributed.

Fahrenheit kept its license while it appealed to Richmond Circuit
Court. Subsequently, Judge Theodore Markow ruled that Fahrenheit had
not become a meeting place for drugs. His decision reversed the 2001
findings of the ABC Board. Markow also determined that the ABC
investigation had been compromised because government agents were sent
into Fahrenheit to solicit drugs.

The ABC appealed to the Virginia Court of Appeals. In its ruling last
week, the court said the ABC Board erred in applying an overly broad
interpretation of the statute governing what constitutes a club's
culpability in drug-related crimes on its premises.

A representative with the ABC could not be reached by press
time.

"This finally proves my client is vindicated of all charges," says
Paul Buckwalter, who represents Fahrenheit and its owner, Ted Kastanos.

Buckwalter has maintained that the real targets of the sting were not
individuals but the clubs themselves, and that the scrutiny by the ABC
tarnished the club's reputation, and caused it to close. Fahrenheit
may sue the ABC in civil court, he says.

The series of cases related to Operation Ex-Clubs prompted the
Virginia General Assembly this year to amend the Code of Virginia to
make it easier for ABC agents to successfully prosecute clubs
suspected of becoming havens for drugs.

Buckwalter says the question - with a new ABC director and board - is
how freely the ABC will apply and interpret the newly modified
language of the statute to target businesses where drug-related crime
may or may not occur.