SANTA CLARA -- State inspectors revoked the alcohol license of a Santa Clara restaurant because they said it was essentially a nightclub in disguise and allege it fostered illegal drug sales, lewd behavior, drinking by a minor and letting servers charge a drink premium for keeping patrons "company."

El Herradero, near Scott Boulevard and Monroe Street, had its license suspended Jan. 2, according to the state's Alcoholic Beverage Control. The agency also said there was little evidence the business had a functioning kitchen or was offering meals, which is the basis of the restaurant license it obtained to serve beer and wine.

A liquor license typically held by bars does not have the meal service stipulation, but the fees to purchase and maintain the license can cost as much as 10 times more than a license to serve beer and wine.

During a three-month undercover investigation, investigators, working with local police, said they found violations with the presence of scantily clad servers and the apparent simulation of sex acts with patrons.

The investigation also uncovered an alleged scheme where female servers talked male customers into buying drinks with an added surcharge for "keeping male patrons company," after which a commission would be paid out to the server.

The agency said the alcohol license for the business has been indefinitely suspended, which was agreed to by the owner until it can be transferred to another merchant.

Contact Robert Salonga at 408-920-5002. Follow him at Twitter.com/robertsalonga.