Lord of the Fly

Investors in the Dragonfly Bar & Restaurant say they were fleeced by partner Steve Kahn, but he claims his accusers had him framed

Steve Kahn thought the raid was routine. After all, agents from the Texas Alcoholic Beverage Commission had paid him a fistful of visits at the Dragonfly over the past few months, checking out the kinds of problems every nightclub encounters--liquor-law violations, intoxicated customers. He suspected he had raised the ire of the Lower Greenville Neighborhood Association or someone else complaining that things had gotten too rowdy. But it was New Year's Eve. Kahn had just reopened the Arcadia on Greenville, converting it from a Tejano bar to a concert venue and dance club. Next door was his Dragonfly Bar & Restaurant, and both were packed with partiers and poseurs reveling in the scene. His scene.

Yet this would be no ordinary raid. Five agents descended on the Dragonfly, but their search turned up nothing. Then two agents escorted Kahn to the Arcadia and muscled their way through the crowd. Kahn played it cool, stopping to chat with a cashier before the trio approached the Arcadia's office. Kahn unlocked the office door and an adjacent liquor storage area. The agents moved in, and again found nothing.

But they weren't through. Agents searched his black 1998 Explorer valet-parked in the driveway in front of the Arcadia's entrance. Only this time they found what they were looking for. In a nylon organizer attached to the driver's-side visor was a Ziplock baggy containing cocaine--1.6 grams of it.

"No, no, no!" Kahn yelled repeatedly after the discovery. But his protests weren't enough to dissuade TABC Sgt. Brent Roberts from hauling him off to Lew Sterrett Justice Center for felony possession of a controlled substance. Roberts' arrest warrant not only recounted Kahn's reaction, but also detailed how the raid on the Dragonfly followed two anonymous calls to the Dallas TABC office, how the callers said cocaine was being used at the Dragonfly and stored by Kahn in his Explorer. The informants were all the fodder Kahn needed to claim that the drugs were somehow planted on him--by the valet attendant, by the Dragonfly's manager, by an ousted partner. The blame would shift over time.

Kahn finally decided that Charlott Norman, one of his Dragonfly investors, and Santiago Pena, a disgruntled construction contractor, were the real culprits who had framed him. He claims the move was the decisive strike in a vicious, months-long legal struggle to gain control of the lucrative nightspot, named for a flying predator with an insatiable appetite for mosquitoes and sex. Within a week of Kahn's arrest, the Dragonfly had lost its liquor license; once deprived of its lifeblood, it immediately closed. No more libidinous singles waiting to see and be seen; no more dancing into the night with lovers and strangers; no more drinking on a rooftop patio with a commanding view of Lower Greenville nightlife.

The shuttering spurred a torrent of court accusations fired from both sides: Kahn was accused of fraud, greed, graft, and being utterly reprehensible. Not to be outdone, Kahn countered with allegations of a grand conspiracy to deprive him of what was rightly his; he also claimed he'd been slandered and threatened with violence. The Dragonfly seemed to elicit in everyone brushed by its wingspan a lust to possess it. And why not? It appeared predestined for raging success. The concept, a hybrid upscale restaurant-bar-dance club, was unlike anything along Greenville Avenue, unlike anything in Dallas.

"We knew it was going to be a moneymaker," says Norman. "We were all going to be a bunch of rich little shits."

When Charlott Norman got her first peek at the Dragonfly's books shortly after the club opened last August, she discovered a discrepancy: Only $9,500 had been deposited the same day that the business generated close to $24,000 in sales. Nearly $15,000 was missing. "Where did all the money go?" asks the attractive 35-year-old widow.

It's a question that has haunted Norman since she invested in the Dragonfly dream more than a year ago. The venture, she says, has drained more than $155,000, not including legal fees, from her personal finances. When the restaurant's capital seemed to appear and vanish with vexing regularity, it prompted her fierce fight to gain control of the Dragonfly before it ruined her.

And she had plenty to ruin. An accountant by training, Norman kept the books for her husband's business, Designer Gutter Co., a successful Dallas home-improvement venture that he launched in the early 1980s. In 1984, after selling the business, they moved to Florida to be near his family. There, they began a similar business dubbed Florida Aluminum that achieved comparable success. But in the early 1990s, their string of good fortune came abruptly to a halt after her husband succumbed to cancer. He died in 1994, leaving her with two young daughters and a considerable chunk of cash.

She returned to the Dallas area and settled in Arlington, where she began a series of dubious investments with her husband's legacy. In January 1997, she founded Evitts-Norman Entertainment, a concert-promotion company that would quickly fail. But while operating it, she hooked up with Brad Priebe, the onetime manager of the successful Deep Ellum club The Bomb Factory. And it was Priebe who came to Norman in November 1997 with a project he had devised with local entrepreneur Steve Kahn and a plea for cash to see it come true. Priebe had once worked with Kahn running The Bomb Factory, and each claimed exclusive credit for the conceptual development of the Dragonfly.

"Dragonflies have a ferocious appetite," said Kahn in The Dallas Morning News, explaining the bar's "nouveau eco" theme and its relationship to Lower Greenville nightlife. "Their sexual ability is abundant, and they're always mating and finding companions." Priebe told the newspaper he and Kahn planned to open several bars with the fly theme, including the Bar Fly and the Fruit Fly. It was a strategy they thought would catapult them to the pinnacle of Dallas' nightclub scene.

"I've been in the club business for quite a while," says Kahn, "and it was a cool name and a cool concept." And that concept was how Priebe sold Norman on both Kahn and the Dragonfly: a tony crossover nightspot that included a restaurant, jazz lounge, cigar bar, and dance club slated for the former London Tavern space on Greenville Avenue.

Norman recalls that the first time she met Kahn she didn't care for him. "I just got the feeling that he was not an aboveboard kind of guy." But his resume, which included key roles in clubs like Eden 2000, Blue Planet, and Prime Time 21, impressed her. And she could see that his persuasiveness and charisma were just what the project needed to draw attention and crowds. Even though a bit smarmy, he definitely had the gift of gab. And he would be a good front man.

Tall and wiry with slicked black hair, 38-year-old Kahn is a dark, brooding man with a stark, angular face. His speech is rapid and spasmodic, his words running together almost in a slur. Some find his approach unpleasant and grating, others manipulative and convincing. But almost no one disputes that Kahn has a knack for uncovering personal vulnerabilities--whether they be greed, vanity, or pity--and exploiting them mercilessly.

"I didn't like Steve. But that didn't mean I couldn't do business with him," Norman says. Yet if she had taken the time to peek into Kahn's past, she may have reached a different conclusion.

Kahn comes from a family of fiercely independent entrepreneurs who have a nasty habit of suing the hell out of one another. In the late '70s, his father, Charles Kahn, launched a wholesale shoe business that he quickly expanded into 10 retail stores. In the '80s, through his son Bruce, Charles became involved in the nightclub business, an enterprise that eventually drew him and both of his sons into a series of club ventures.

In 1991, Steve Kahn, along with his mother, Marcia Kahn, started Condom Sense on Greenville Avenue, a retail prophylactic business that gained popularity during the campaign for safe sex. It was, Kahn says, his proudest moment as an entrepreneur. "We enhanced plenty of relationships," he boasts. "The mentality changed in our society--you know, the safe-sex thing. The divorce rate started to slow down. People were getting in tune with their sexuality and were hopefully doing it as couples."

In 1993, Marcia filed suit against Steve, accusing him of embezzling $18,595 from Condom Sense and spending the money for his own personal use instead of covering business expenses and debts. The case would be settled in 1995. Condom Sense on Lower Greenville was sold to Jamal Alshalabi, a Dragonfly investor, in 1997. Marcia still operates the Condom Sense on Electronic Lane in Dallas.

Marcia had already been sued in December 1990 by her son Bruce, who claimed that he had purchased a dining-room table, couch, and refrigerator and stored it in his mother's house for safekeeping. Only she refused to return the items. The case was eventually dismissed for "want of prosecution."

In 1996, Steve and his father were sued by nightclub owners M.M. Halabi and Abdul Galil Noaman, who alleged fraud and conspiracy in connection with the Kahns' operation of Prime Time 21, Eden 2000, and The New Mirage clubs. Halabi and Noaman were partners with Charles Kahn in the corporations that ran these clubs, each with roughly a one-third interest. Charles had installed Steve as manager of some of the clubs over the strenuous objection of the other partners.

Among the allegations were that Charles Kahn diverted corporate funds to cover personal expenses and that father and son had conspired to wrest control of the clubs from Halabi and Noaman. As part of the settlement, ownership was divided between them: Charles took control of Eden 2000; Halabi and Noaman became exclusive owners of Prime Time 21 and The New Mirage. Steve Kahn was also permanently enjoined from being on the premises of either Prime Time 21 or The New Mirage.

On July 10, a week before the settlement became final, Charles Kahn took his own life. Marcia Kahn had sued him for divorce six months earlier, and police reports reflect that he was despondent over the end of his marriage. One acquaintance says his depression was exacerbated by the financial strain caused by the Halabi case.

In July 1998, brother Bruce filed suit against Steve for breach of contract, alleging Steve diluted his 30 percent ownership interest in 35 Royal Entertainment, a company they formed to operate the Ocean Club & Video, a sexually oriented business venture that figures prominently in the demise of the Dragonfly. Steve was accused of procuring additional investors primarily for his own personal benefit. On February 12, the brothers, having reconciled their differences, filed a joint motion to dismiss the case.

Steve shrugs off these episodes of legal wrangling, dismissing them as family feuds. But they are the same kinds of charges--fraud, misuse of company funds, breach of fiduciary relationships--that Charlott Norman would level against Kahn before the Dragonfly even opened its doors.

In February 1998, Norman went against her instincts and invested $100,000 in the Dragonfly, taking a one-third interest in the place, the largest share of any of the six limited partners. She did so with the understanding that Kahn and Priebe would control the venture's general partner, Dragonfly LLC, in equal parts. Corporate documents list Priebe as president and Kahn as secretary; both would be wholly accountable to investors, Norman believed.

By April, Norman began to have serious doubts about the project when she learned that most of the $300,000 earmarked for construction was gone, with much of the job yet to be completed. "I knew that somebody was ripping us off," she says. "We had a stripped-down building. I'm talking no walls. No electricity. Nothing. And we didn't have any money."

Kahn blamed general contractor Dale Lookingbill of DRL Construction, whom he fired on May 14. Oddly, that same day, he hired Lookingbill for another project: the all-nude cabaret and adult video and book store he was developing on Reeder Road along Interstate 35 called the Ocean Club.

To complete the Dragonfly, Kahn turned to contractor Santiago Pena of Penaco Industries, a contractor, metal fabricator, and sculptor who is held in high regard within the restaurant industry. Pena's restaurant projects include the Green Room and Stephan Pyles' Star Canyon (in Dallas and Las Vegas) and AquaKnox restaurants. He had already served as a Dragonfly subcontractor, at first hired just to fabricate the interior spiral staircase. He did other interior-design touches, including the granite water wall over the bar, an installation Kahn had ordered over Priebe's vigorous objections to the cost.

Sometime in April, Pena says, Kahn began frequenting his Deep Ellum office, pleading with him to help finish the aborted Dragonfly construction. Kahn knew he couldn't afford Pena, but his nagging persistence finally won over the burly contractor. Pena says that future Dragonfly chef and manager Erick Chavez would sometimes accompany Kahn and that both would plead for him to save them from financial disaster. "They begged me, man," says Pena with an acid edge in his voice. "For [Kahn] to drag me down to his level, that is just the worst thing. I mean, I've got a card from him saying, 'When this job is over, I'm going to owe you my ass.'"

Pena agreed to do the job--as a favor, he says--and told Kahn he'd cut his normal rate by more than half and start as soon as possible. But he quickly realized that he had been sucked into someone else's nightmare. He claims that much of Lookingbill's construction on both the Dragonfly and the Ocean Club had to be redone because it wasn't up to code. At one point, he yanked his crew and equipment off the project in mid-construction because he had a handful of bad checks totaling $40,000 written against Dragonfly accounts. But Pena came back, lured, he says, by Kahn's promises of payment and a potentially lucrative construction contract for the Ocean Club.

"I had so much money tied into it that I didn't know what else to do," says Pena. "[Kahn] promised me from the beginning, 'You'll get paid every penny. You won't be owed a dime, I swear to you, man. I'll owe you big-time.' All this crap. This guy's a fucking con man."

While Pena was completing construction on the Dragonfly, Kahn made a mad scramble for a fresh infusion of investor funds. Charlott Norman says Kahn secured a secret $50,000 loan from James Emerson, a limited partner lured to the project by Erick Chavez. Norman also coughed up another $25,000, wiring the money from her investment account to the Dragonfly account to cover bounced checks.

On May 20, Kahn and Priebe made a $75,000 capital call to all the limited partners, for which Norman put up another 25 grand. She also personally paid Pena another $5,500 for construction costs, making her total investment more than $155,000. As part of this capital call, the general partners were each forced to pony up a sizable contribution, but Priebe didn't have the needed funds. In early July, Kahn used the opportunity to oust Priebe as co-general partner and consolidate his control over the venture. He would eventually change all the locks and prohibit Priebe from going on the premises. Kahn also blamed Priebe for mismanaging parts of the Dragonfly's construction process. (Priebe refused to comment on the substance of these allegations.)

After getting wind of this capital call, Cheryl Lookingbill, Dale Lookingbill's sister, approached Priebe with a disturbing story. She said her brother told her of a kickback scheme that Kahn engineered to embezzle the partnership out of more than $60,000. She affirmed these allegations in a signed affidavit dated July 1. On July 6, Dale Lookingbill himself signed an affidavit confirming his sister's story. He said Kahn hired him as the Dragonfly's general contractor with the stipulation that he pay significant chunks of his fee back to Kahn.

"On a regular basis, I submitted actual material and labor costs to Steve Kahn," Lookingbill says in his sworn statement. "At that time, he instructed me to add a varying amount to the actual costs as a contractor's fee, and Steve Kahn required me to kick back all or a portion of the contractor's fee to him, which I did."

With Priebe's removal and Lookingbill's charge of graft, Norman grew more determined to eject Kahn and gain control of the Dragonfly before her investment zeroed out altogether. "This was everything that my husband left me," she says. "I might go down, but not without a fight."

On July 2, both Norman and Priebe filed a lawsuit against Kahn alleging he had committed fraud, breach of a fiduciary duty, and misappropriation of partnership funds. They requested a permanent injunction to remove Kahn as general partner and in his place install CCMN Inc., a corporate shell that Norman formed to take over the Dragonfly once and for all. But once the Dragonfly managed to open its doors on August 5, Kahn proved more tenacious and resourceful than she could ever imagine.

Weekend nights at the Dragonfly, lines of the young and the restless roped around the block as if the entrance held the key to life's pleasures. Each wannabe patron shuffled past Santiago Pena's metal dragonfly sculpture clinging to the outer wall and past bouncers with headsets at the front door. They crushed toward the bar and a row of stools with dragonflies sculpted into their metal chair-backs. Pena's black granite water wall dribbled above the bar. They pushed past odd jellyfish-like sconces clinging to the walls and moved through a tunnel canopied by a copper canvas, channeling them into a room that harbors a small wine and cigar bar. They hung onto the spiral staircase reaching up to the expansive mezzanine overlooking the dining room below. They jammed onto the rooftop patio, taking in the thick summer air, struggling to order drinks from the outdoor bar on the west wall. During dinner, they chewed on selections from an "eclectic new American cuisine" that included 20,000 Leagues Calamari and Texas Cross Quail.

Jazz filled the dining room during dinner. But at roughly 10:30, the tables were pushed aside and the floor was cleared. Colored lights were switched on, and the place was pumped into a high-energy dance club with the deadening throbs of house music. From the iron railings on the rooftop patio, people leaned and waved at cars creeping down Greenville Avenue, summoning even more bodies into the stuffy environs.

"It was almost unpleasant to be there," says an early Dragonfly frequenter. "It was just a mob of people. Every inch was packed. It would bottleneck on the spiral staircase, and it just became rows of standing people, unable to move."

Kahn seemed to revel in the Dragonfly's charged atmosphere. He rented a house down the street from the venue that he christened his "entertainment house." At least three sources close to the Dragonfly say he would brag about how he would lure small groups of women to the house and indulge in long sessions of sex.

Kahn scoffs at such talk. He says he rented the house so his managers could go to the bathroom. "When a manager has to use the restroom at the Dragonfly," he says, "you can't stand in line and ask people to get out of the way."

Every weekend the pace was the same, so much so that Kahn imposed a five-dollar cover charge in an attempt to keep the crowds manageable and generate much-needed revenue. Kahn referred to the Dragonfly as a five-star restaurant, but Dallas restaurant critics ripped the place apart, belittling its badly formulated and executed menu and its makeshift jazz stage that made dining clumsy. The place reverberated with noise, but bad food and jarring sounds didn't stop the crowds drawn to its bristling singles scene from coming. The space was perpetually plugged with Dallas beautiful people--scantily clad and fearlessly forward.

But as the Dragonfly swelled with success, the struggle for control of it intensified. Dissatisfaction with Kahn was running at a fever pitch among many Dragonfly investors. "I had doubts of ever seeing my money out of it with him in charge," says one limited partner who spoke on the condition of anonymity. "There was a lot of smoke, but no fire; a lot of suspicion, but not necessarily hard evidence. Any hard evidence that should have existed was covered up by sloppy records and bookkeeping."

In late September, Norman and Priebe played on this discontent, embarking upon a scheme to secure the proxy votes of two other investors to remove Kahn as general partner and put Norman's CCMN Inc. in his place. To secure a majority of votes, Norman and Priebe had to guarantee to buy the two investors' shares once Kahn was removed.

On September 28, with the necessary proxy votes in hand, Norman went to the Dragonfly and slapped Kahn with a notice of removal as general partner. The only problem was, Kahn refused to leave, laughing at Norman's attempt to fire him. Then he called the police, telling them that Norman was no partner of his, but a trespasser; he demanded that she be arrested. As proof, Kahn showed the police the Dragonfly lease, which bore his name as tenant. Not wanting to involve themselves in a civil matter, the police let Norman off with a criminal trespass warning and told her to leave. Norman had no choice but to pursue her remedy in court.

However, state District Judge David Godbey short-circuited her next attempt to evict Kahn by forcing the case into mediation. Norman and Kahn reached a settlement whereby he would buy out her interest. Terms included a down payment of $35,000 due November 9, followed by monthly payments of roughly $8,700 per month for 24 months. But when Kahn failed to produce a final settlement draft or make any payments, Norman hunkered down for their fiercest round of sparring yet.

On December 22, Charlott Norman again moved against Steve Kahn, this time in the form of a crude corporate takeover attempt. Armed with documents proving she was now the general partner of the business operation, Norman hoped to physically seize the Dragonfly premises.

Accompanying her was Santiago Pena, who had fallen into a financial black hole because of Kahn. He says he is owed more than $120,000 from his Dragonfly labors and more than $78,000 for his work on the Ocean Club. He even cites the emotional turmoil created by his association with Kahn as the cause for the breakup of his marriage. Small wonder he joined forces with Norman by providing her with his key to the nightclub. But exactly what happened after their entry is still the subject of much dispute.

Ask Dragonfly chef Erick Chavez and Steve Kahn, and they will say that at 7:30 a.m., Norman and Pena ripped the side door of the restaurant off its hinges and forcibly made their way inside, tripping the security alarm in the process.

When Kahn and Chavez arrived at roughly 7:45 a.m., they claim, they found the intruders, joined by "three or four other individuals, looked like biker kind of individuals, long hair, tattoos, people of that nature." Chavez says the biker gang immediately took over the place, terrorizing them by brandishing guns, knives, and other weapons. Both Kahn and Chavez claim they asked the group to leave, a request they refused. So Kahn called the police.

Norman's and Pena's accounts of the day differ considerably and are partly substantiated by police reports, which make no mention of a forced entry or any bikers assaulting Kahn and Chavez with weapons. However, their entry did trigger the security system, and the police were called to the scene, followed by Kahn and Chavez. When Kahn insisted the officers arrest Norman and Pena for breaking and entering, they refused after Norman produced paperwork proving she was a partner. Before the police left, they asked whether anyone was armed.

Pena said he was and produced a valid carrying permit. Whereupon Kahn demanded that he be allowed to carry a gun as well. Since he was ostensibly on his own premises, the cops gave him the OK, says Pena, and "Steve ran out to his truck and grabbed a gun and came back and was putting the gun in the front of his pants there, and walked around with it like that." Norman would later secure a gun from her car--but only for protection, she says

What followed was a session of cop pingpong: Kahn or one of his cohorts would punch 911, the cops would arrive, Kahn would demand they arrest Norman and Pena, and the officers would explain they couldn't get involved in a civil matter and leave. Between 7:30 a.m. and 10:42 a.m., this episode was repeated four times, until one officer threatened to make an arrest for abuse of the 911 system.

Pena desperately wanted to leave, but Norman persuaded him to stay, she says, until 11 a.m., when her pair of bodyguards arrived. Her attorney, Gary Sibley, provided them, and as it turns out, Kahn's description of them wasn't far off: They were longhaired, leather-jacketed, and menacing. Norman and her companions essentially became squatters, occupying the premises for the day.

By the afternoon, Kahn had seen enough. So he went to the courthouse and secured an emergency temporary restraining order against Norman. At 6:30 p.m., a Dallas County constable arrived to escort her and the bikers, who were armed only with pocketknives, off the premises. Kahn had successfully thwarted Norman's second coup attempt.

Kahn would claim that Norman, Priebe, and Pena tried to overthrow him yet a third time when he was arrested by the TABC on New Year's Eve and charged with possession of cocaine. On January 8, under pressure from TABC officials, Priebe surrendered the Dragonfly's liquor license to the agency. Kahn charges that Priebe had no authority to surrender the permit since he had been forced out of the operation the previous summer. Of course, that only raised several questions: The courts had yet to decide whether Priebe's ouster was lawful, whether Kahn was still the general partner, or whether Norman had successfully usurped him of that position. Without a liquor license, however, Norman and Priebe had essentially shut out Kahn by shutting down the Dragonfly.

In February, Kahn countersued Priebe, Norman, and Pena for $5 million, charging them with slander, perjury, assault, entrapment, and breaking and entering. Kahn maintains that these activities were all part of a broad conspiracy to pry him from the Dragonfly's reins through smear tactics and a false arrest. Among other things, the suit alleges that Pena, acting in concert with Norman and Priebe, planted cocaine in Kahn's black Ford Explorer and then tipped off TABC agents. Kahn claims he has evidence that "certain individuals" made phone calls New Year's Eve day to Dragonfly employees indicating that "something big is going to happen to Steve tonight." Kahn and his attorney, John Schorsch, also say they are in possession of TABC documents indicating Pena's involvement in the raid. "It's not hard to plant drugs in somebody's car," says Kahn. "That will come out in the wash as well."

That someone Kahn knew turned informant against him seems a foregone conclusion; that someone planted drugs on him is another matter entirely. Pena strenuously denies having acted in either capacity. "All of it is BS. All he's trying to do is not pay the bill that he owes. I've never seen cocaine, man. I don't know what it looks like, much less plant it."

Even Chavez believes that Kahn's charge that a Pena-led trio framed him by planting drugs in his car is hogwash. "I'm willing to bet that's 99 percent not true," he says. "[Kahn] ran his mouth saying that I'm the one that put them in his car. And then he said the valet did it, that Pena did it."

However, Chavez maintains that Priebe, Pena, and Norman were involved in a corrupt conspiracy to boot Kahn. He has sworn under oath that he and other Dragonfly employees were offered payments in an attempt to solicit testimony detrimental to Kahn. Chavez charges that Norman called him on his cell phone one evening and offered him $35,000 to testify against Kahn. Chavez says he asked for $50,000.

Norman adamantly denies tampering with any potential witness or offering anyone a bribe.

"Pena was in cahoots with Charlott for a long time," says Chavez. "That building is a moneymaker, and she wants to run it...She wants to be the queen of everything."

After seven months of legal wrangling, Charlott Norman finally had her way in court. On March 12, Judge David Evans granted her a temporary injunction, finding that the September proxy vote was legitimate and done according to the terms of the partnership agreement; she had every right to remove Steve Kahn from his position as general partner and install CCMN Inc. The judge will likely rule on Kahn's countersuit in the fall.

But that didn't stop Norman. On March 16, she was at the Dragonfly with a locksmith in tow, changing every lock in the place. Once inside, Norman walked to the bar, her eyes scanning the room. This was the first time she'd been there since a constable escorted her off the premises 10 weeks ago. A thick, musty smell soaked the air. Drywall was peeled back in spots on the ceiling near the front windows. Crushed cigarette butts dotted the concrete floor veiled with a layer of dust. The Dragonfly had a leaky roof.

"It looked better than I thought," Norman offers. "I didn't know what to expect."

Several minutes later, Brad Priebe strolled through the front door. This was the first time he had been in the bar since shortly after it opened in late summer, when Kahn had him and his girlfriend thrown out by four bouncers--people Priebe hired, he says.

Norman fully intends to raise the Dragonfly from its financial swamp, though it won't be easy. She says the TABC is hesitant to issue a new liquor license if there's even a hint that Kahn would have a hand in its operation. (TABC officials declined to comment.) She may also have to file bankruptcy. In its five short months of operation, the Dragonfly generated somewhere between $1.1 million and $1.4 million in gross sales. Yet its investors say they have yet to see a dime of it.

After reviewing Dragonfly sales and invoice records from the restaurant's computer files, Norman says that at least $400,000 is unaccounted for. She discovered that the operation owes tens of thousands of dollars in TABC taxes along with a significant chunk of the original construction costs. Large outstanding balances are due the plumber, the electrician, and the refrigeration system and booth-seating contractors. One subcontractor told the Dallas Observer he's owed roughly $30,000, and Kahn stated flatly that he'd never see a penny of it. Kahn has taken a similar position regarding contractor Santiago Pena, claiming the man who he once said had "saved his ass" was owed nothing.

From his tiny, disheveled office in the Arcadia, Kahn denies any misuse of Dragonfly funds. "Every dollar is documented in the checking account," says Kahn. "The money is reconciled every single night. I don't touch a penny, and every penny is accounted for." But when asked to present hard proof--financial reports, bank statements, corporate ledgers--he offers nothing besides his own indignant attitude.

Kahn says he personally pumped more than $264,000 into the Dragonfly, though many close to the operation believe most of it came from various loans made to him by his Ocean Club investors. What isn't in doubt is that he pulled money out at a rapid rate to pay himself back, a move Chavez says severely hampered the Dragonfly's ability to pay TABC taxes.

"If he put in all this money," says Norman, "we had no idea what it was for or where it went."

Kahn, wearing jeans, cowboy boots, and a Road Runner cartoon T-shirt, says his fight is anything but over. One day he will prove he was unfairly maligned and send the Dragonfly aloft again. "There's absolutely below zero evidence on anything they've alleged. I mean, it never happened.

"I have no enemies," he stresses. "I'm a very passive individual. I try to do the right thing as much as I can. And I've done the right thing in relation to everybody."

He leans back and thinks for a moment. Then he lunges forward, gesturing dramatically with palms open. "I'm the best partner you could ever have. My hands are clean.

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