Battle lines form in bankruptcy case of company that was developing Newton’s estate

Amid matters routine to a new bankruptcy case, the battle lines started to form in the Chapter 11 filing of CSD LLC, which was redeveloping entertainer Wayne Newton's Casa de Shenandoah estate into a tourist attraction and museum based on his career.

At a Wednesday hearing, U.S. Bankruptcy Judge Bruce Markell approved a budget of about $300,000 to pay for expenses such as security and utilities until Nov. 5. At that point, he will rule on a permanent operating budget funded by a loan, known as debtor-in-possession financing, from a company owned by Texas businessman Lacy Harber.

Harber and his wife, Dorothy, also own 70 percent of CSD through a different entity and have funded the purchase of and the work on the 38-acre ranch over the past two years. The bankruptcy loan could go to a maximum $2.5 million, but Markell said he would scrutinize it closely because it comes from an insider.

The much bigger fight will likely come Dec. 14. That's when CSD attorneys will propose terminating a series of CSD obligations, including allowing Newton and wife, Kathleen, to remain in the mansion for $1 a month, spending as much as $2 million to build them a new home elsewhere on the property and taking care of his 51 Arabian horses.

In Clark County District Court proceedings, Harber particularly fought the horse obligation, claiming it was costing him $37,000 a month.

Through a corporate entity, the Newtons own 20 percent of CSD.

According to CSD attorney James Greene, these steps are an important prelude to a planned auction of the property.

"We want to wrap up the company's affairs in the most efficient way possible through the bankruptcy process," said Greene. "We want to sell the property as cleanly as possible."

Attorneys for the Newtons will likely challenge the legitimacy of the case, however, because the bulk of the debt is held by insiders, not banks or outside businesses.

"It is our belief that this is a two-party dispute" that does not belong in bankruptcy, said Newton attorney Bryce Kunimoto.

Newton, who went through a personal Chapter 11 two decades ago, said he was encouraged by Markell's comments about looking closely at the interim loan made by Neva Lane Acceptance LLC.

"The judge has a really good feel for what is going on here," he said.

Over the summer, the Newtons fought two pre-bankruptcy loans by Neva Lane as indirect ways to oust them.

But CSD said the money was necessary to keep operations going after Harber decided to quit investing money directly into the project because of ongoing disputes and costs that he said now top $60 million.

Contact reporter Tim O'Reiley at
toreiley@reviewjournal.com or 702-387-5290.