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The new Cotton Club continued to thrive just before summer of 1939, as soon as the Internal Revenue Service hit the club's management with indictments for income tax evasion. The indictments hit the Cotton Club Management Corp, including Herman Stark - President, George Goodrich, -- Accountant, and Noah Braustein - Secretary-Treasurer, with four counts of failure to pay, and embezzlement of tax return. If convicted, all three men could face very much as 25 years in prison, and fines of equal to $20,000 apiece. Amazingly, because he was just listed as an employee, Frenchy DeMange escaped the indictment. At trial, the Cotton Club Management Corp. identified guilty, however the three officers escaped conviction. Still, Stark had to fork over a hefty fine to the government, in addition to $3,400 owed in back taxes.

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