John J. Flood   Bio & Jim McGough (Biography)
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Date: Saturday, April 12, 1986 Source: By William B. Crawfo rd J r. Section: NEWS Copyright CHICAGO TRIBUNE FORMER CLUB OWNER GUILTY OF RUNNING SEX RING

The former owner of a Chicago Heights sex club was foun d guilty by a federal court jury Friday of charges that he operated a prostitution ring in violation of federal laws.

The jury found Herbert Panice Sr. guilty of 1 count of racketeering and 16 counts of using the telephone to further the illicit sex operation.

U.S. District Judge Charles Norgle, who presided at the eight-day trial, set May 29 for sentencing.

Mark Prosperi and John Evon, U.S. Department of Justice prosecutors from the organized crime strike force in Chicago, told Norgle they had no objections to Panice remaining free on bond pending sentencing.

Panice, 64, formerly of Flossmoor, was the first defend ant to stand trial as an outgrowth of the government's Operation Safebet investigation, a "sting" operation in which FBI agents ran a creditcard clearing ho use based in Palatine. The government agents set up National Credit Service and for four years reimbursed sex club owners for charges their customer s incurred for prostitution and other illegal services.

Panice was charged with operating a prostitution ring from the basement of the Show Club lounge, a nightclub he owned in Chicago Heights. National Credit

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would process sex purchases made by credit cards, reimbursing Panice and collecting from the credit-card company by listing the acquisitions as legitimate consumer purchases.
Norman Transeth, a veteran FBI agent, testified that the defendant told him that Lt. James Keating and Sgt. Bruce Frasch, both former heads of the sheriffs vice unit, regularly forewarned Panice of vice raids and of her police activities.
Keating, 48; Fransch, 39, both formerly of the sheriff s vice unit; and four other persons were indicted last August on charges that the y took more than $50,000 in payoffs to protect Panice and other bar owners. Keating and Frasch are awaiting trial.
The FBI firm hid credit-card billings under the names o f legitimate- sounding companies, making it possible for some customers to list payments to expensive call girls as legitimate business expenses. In sifting through the credit-card charges, agents stumbled into the alleged police payoff scheme.
At one point, Transeth said, Panice bragged that he was bringing in almost $100,000 a month in revenues through prostitution at the clu b.


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