Sexual Dealing

The truth about Cabaret Royale's blue-chip fantasy world

In May, Salah Izzedin filed bankruptcy for two Cabaret Royale-related corporations, Prive and Priba. The bankruptcy stalled the lawsuits for the moment and turned the focus to the club's assets. The bankruptcy filing means that, even if people suing Cabaret Royale win their lawsuits, the nightclub may not have to pay a dime--because Izzedin insists Prive and Priba were broke at the time of dissolution.

Since declaring bankruptcy for Prive and Priba, Cabaret Royale officials have striven to separate the two companies from the famous nightclub. Prive and Priba were only operating Cabaret Royale, attorney Jack Gillis says. They were not Cabaret Royale itself.

"The club was not being operated to [Cabaret Royale Corporation's] standards," Gillis says, "And the lease was terminated."

Gillis and Millard also contend that Salah Izzedin has little influence on the new, improved corporations running Cabaret Royale.

"Izzedin doesn't own Cabaret Royale," Gillis says. "It's a publicly traded company. What he does for a living these days, I couldn't tell you."

What Gillis and Millard fail to point out is that Izzedin, through his Oceanic Oil Corporation, has a controlling interest in the topless club's new parent company, Cabaret Royale Corporation. And his sister Leila Izzedin is president of CRC Dallas Food and Beverage Operating Corporation--the corporation that replaced Prive and Priba, according to Securities and Exchange Commission filings.

Cabaret Royale is further entangled in the Izzedin family through the Fuoad Izzedin-controlled limited partnership that supposedly fired Prive and Priba, Walhill Partners Limited, which transferred its assets to a Delaware "shelf" company in September of 1993, according to SEC records. The "shelf" company, which changed its name to Cabaret Royale Corporation after the transfer, had been incorporated on paper for years but wasn't doing business.

After the transfer of assets, Cabaret Royale Corporation applied to trade its stock on the NASDAQ and Boston stock exchanges--the latter under the symbol GIRL.

The bankruptcy trustee is now investigating whether assets have been illegally transferred from one Izzedin corporation to another to avoid paying creditors.

"We are still reviewing the records because there are no physical assets we've been able to locate," says Daniel Sherman, the trustee assigned to the Prive and Priba bankruptcy case. "We're reviewing possible transfers to see if any one of them can be reversed."

If the bankruptcy court shows the corporation received nothing in return for transferring money or property, then the court can claim the property for creditors, Sherman says.

Sherman says the high number of corporations controlled by the Izzedin family makes Cabaret Royale's case extremely hard to unravel.

And while Cabaret Royale has always made loads of money, it has also required big bucks to operate. Bankruptcy records reveal that while the Cabaret Royale nightclub in Dallas grosses between $5 and $7 million a year, its operating budget leaves the club with less than $100,000 in net income.

Millard strongly denies suggestions that the Izzedin family or other owners of Cabaret Royale-related corporations shifted assets to avoid creditors. He says Cabaret Royale is able to expand because of new capital obtained through its public stock offering.

The bankruptcy investigation is ongoing. Meanwhile, Ami Lindsey's attorney, William Isbell, is fighting in court to get other Cabaret Royale-related corporations linked to the two bankrupt entities. In addition to bankruptcy, Isbell says, the case is stalled because Cabaret Royale officials have balked at turning over corporate financial information.

Millard says the company has not made available its financial records because it believes the lawsuits are trifling.

Unusual circumstances have also contributed to delays in getting the information to the bankruptcy trustee. Three weeks after Cabaret Royale transferred assets to its public company, the nightclub's longtime accounting firm, BDO Seidman of Dallas, resigned. Cabaret Royale officials later took great pains in the firm's quarterly report to assure shareholders that the defection wasn't a result of questionable business practices.

"To the best knowledge of [Cabaret Royale Corporation], the accountant's past reports on the financial statements have not contained any adverse opinion," the latest 1994 quarterly report stated.

Then two weeks before Cabaret Royale officials were to turn over the club's financial books to the bankruptcy court, Cabaret Royale night auditor John Christhilf, 48, was found dead from a gunshot wound to the head in the Dallas nightclub's management offices. A cleaning crew found Christhilf's body face-down on the floor at 3:30 a.m. on July 5.

When a medical investigator turned over the body, he found Christhilf's tie used as a gag. The medical examiner's office ruled the death a suicide, noting that Christhilf had been paraplegic since a car accident in 1993. The gun, a .38-caliber revolver kept in Cabaret Royale offices--according to the medical examiner's report--was found at Christhilf's feet.

"There are no clear cut indications that the establishment was robbed," Medical Examiner's investigator Eric Rosenstrom reported. Police found a large quantity of cash inside the office, and noted that none had been taken from Christhilf's wallet.

Police believe Christhilf--who was also a financial director for Boy Scouts of America--gagged himself to make his death look like murder.

Christhilf's death led to insinuations of foul play at Cabaret Royale, Millard admits, even though Christhilf only dealt with night receipts and didn't work in the company's accounting office.

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