The Strip Club Dilemma: How businesses will be forced to balance their own security with customer privacy

A guy walks into a bar.  Oh, and it’s a bar with nearly-naked dancers, and VIP party rooms where it’s possible to spend thousands of dollars at a time.  Or hundreds-of-thousands, in this case.

The Houston strip club, called Privilege, is suing James Jay Beckman for  $321,000 that was charged to his employer-issued credit card at the club.  Beckman allegedly reported the card stolen after enjoying about a month’s worth of expensive evenings at Privilege, and the club didn’t get paid.  The employer, CIT Group, Inc. is also named in the suit. (Read the story here from the Fox News Houston affiliate.)

Habeas Hard Drive can think of numerous sources for digital evidence to prove whether Beckman was actually present in the club to receive the lavish services he (and his employer) were charged for.

Instead, let’s contemplate the ongoing business dilemma for the club, and for an ever-growing number of business categories.  Customer demand for privacy and anonymity is no longer confined to erotic products and services. It is the next big dilemma for all business, as consumers realize they’re being constantly tracked.  As the awareness grows, so will the backlash, and the desire for private transactions of all kinds.

The strip clubs walk a tightrope between security and privacy. Their risks include not just fraud, but incursions from law enforcement that could threaten the very existence of the clubs. Their practices provide a study in risk assessment.

There’s ample technology to protect the clubs from fraud and liability.  Driver’s license readers, for instance, offer reasonable assurance that no underage persons enter the facility. If Privilege uses such a reader at the front door (and we don’t know if they do), it could help determine whether Mr. Beckman, his legal ID, and his credit card were all in the same room when the charges were made. It would prompt questions about whether he also reported his driver’s license missing, or paid a visit to the DMV for a new license.

But law-abiding strip club customers don’t relish such scrutiny, for obvious reasons. Information-gathering practices vary widely at the clubs, according to Habeas Hard Drive’s research – ranging from none at all, to intensive.

The other risk is from law enforcement, if sexual solicitation occurs. There’s also the possibility of sexual assault during the dancers’ interactions with customers. Some clubs have live bouncers to keep an eye on heads and feet above and below the doors of lap dance booths.  Some have camera surveillance notices posted nearby.

Habeas Hard Drive suspects the policies are a function of jurisdiction, and the demeanor of local prosecutors.

These are hardly trivial matters, and if the technology scares away some customers — well, maybe that’s a worthwhile risk.

Habeas Hard Drive predicts a wider variety of businesses will have to balance their own security with privacy for their customers, who will balk in the future at invasive security measures. The balance is not easily determined.  Achieving it requires a combination of objective analysis and subjective judgment.

Management must make a list of every point in its relationship with the customer where information is gathered, and then weigh its value, versus the risks.  Risks include both the liability that comes with holding the information, and the risk of alienating a more privacy-conscious consumer.

There are few absolutes on either side of the equation. A threshold has to be set for acceptable risk, to both the business and the customer, after walking through the possible scenarios.  Then, policies and procedures have to fall within the acceptable risk range. All difficult decisions.

There’s also a training task, sensitizing employees to the risks, and teaching them to exercise judgment on the job.

The safe decisions may not always be the smart ones, unless you can afford to watch customers walk away.  Attorneys may want to think now about how to help clients weight their own risks, their customers’ exposure, and strike this balance in the future.

by Ira Victor @ira_victor , and Samantha Stone

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