The brothers Kahn

The Kahn method of doing business appears to go something like this: Come up with a molten nightclub concept. Find a hot spot, one to lure excited investors looking for a glamour buy. Generate enthusiasm among contractors and vendors charged with crafting the sizzling slot by boasting about all the money that'll be raked in. If they hesitate to do the work, beg them, plead for credit, and when their checks start bouncing, shrug it off and passionately promise payment. Swear to it, on your word as a man. Then praise their work to the heavens.

If demands for payment reach a feverish pitch, find fault with the work. Dispute charges. File lawsuits. Call for arrests. It seems to be a Kahn trademark. And it temporarily worked wonders for Steve Kahn while he operated the Dragonfly Restaurant & Bar on Lower Greenville Avenue, until, as told in the Dallas Observer, his partners finally wrested control of the nightclub away from him. ["Lord of the fly," April 1].

And a similar MO seemed to be working for the Arcadia nightclub next door after Steve Kahn took over the place in December and brother Bruce joined forces with him on February 19. That is, until the Texas Alcoholic and Beverage Commission took an interest in the brothers' business dealings. In late March, the Kahns put the Arcadia into Chapter 11 bankruptcy, listing $20,000 in assets and $43,211 in unsecured debts. By far the largest creditor is the state of Texas, to which the Kahns owe some $23,466 in state sales and alcoholic beverage taxes.

Yet the TABC seems more preoccupied with the Kahns themselves than with unpaid booze levies. On May 7, TABC officials yanked the liquor license of Millennium (formerly Club Blue Planet), Bruce Kahn's club on Central Expressway near Park Lane, effectively shutting it down. The agency charges "subterfuge," or operating a club with a straw-man fronting for its liquor license, a misdemeanor under Texas law. The straw man, according to TABC officials, is Houston club operator Kurt Steinmann, president of New Planet Concepts Limited, though TABC officials believe Bruce Kahn is the real finger on the club's lever.

A voice on Millennium's answering system says the club is closed until further notice. Then it steers callers to the Arcadia.

But Millennium's moguls may want to seriously consider changing that message. And soon. In early May, TABC investigators secured warrants against the Kahns charging the brothers with more subterfuge--this time of a conspiratorial nature. Agency officials believe Steve Kahn improperly operated the Arcadia with a license issued to Alfredo Hinojosa and Tejano Ranch Inc., Arcadia's owner when it was a Tejano bar. (TABC, it seems, is a little shy about passing out a liquor certificate to Steve Kahn, especially in the wake of his arrest for cocaine possession in front of the Arcadia last New Year's Eve.)

Maybe that's why the agency asserts that when Bruce Kahn took over Tejano Ranch Inc. and set himself up as Arcadia's owner without listing Steve in any official role, he was simply providing a liquor license (which is still pending) for his brother.

Steve Kahn bristles at such a suggestion. "There's nobody hiding anything," he snaps. "My brother came in here when I ran out of money. I draw a salary. Period. I don't own shit."

But things get stickier still. State liquor officials also charged Bruce Kahn with making false statements on his Arcadia liquor-license application, a felony. (TABC refused to comment on the specifics of the case, citing its ongoing investigation into the Kahn's business practices.)

Others have been drawn into this particular Kahn-effect vortex. Bill Hutchinson, president of Dunhill Partners, the firm that owns the property housing the Dragonfly and the Arcadia, was charged as one of the conspirators along with the Kahns. It seems Hutchinson negotiated a 30 percent stake in the Arcadia (Bruce Kahn has the remaining 70 percent) as part of the lease agreement, a chunk of equity he says he has since discarded. "My interest is in the revitalization of the Lower Greenville area as a whole," stresses Hutchinson, explaining his Kahn partnership foray. "Unfortunately, in this case maybe I was getting too involved...It's not my practice to get involved in shady dealings."

But shade appears to be the overwhelming dividend in this deal. Like the Dragonfly, the Arcadia is littered with disgruntled contractors. Lee Trautmann of Trautmann Iron Works, the firm that manufactured and installed the railings in the club, says he yanked the fixtures from the premises on two separate occasions because of nonpayment on $9,600 in outstanding invoices (bankruptcy filings put his claim at $2,500, a figure Trautmann says is ludicrous).

"They're not going to pay me," he sneers. "They're professional stiff artists." Shameless stiff artists, he believes. After the Kahns put the Arcadia into bankruptcy, Trautmann says, Bruce Kahn attempted to file an injunction against him in an attempt to compel the reinstallation of the yanked railings that had yet to be paid for. Without the railings, the Arcadia was in violation of city building codes.

But Trautmann successfully blocked him in court. While the bankruptcy judge ordered Trautmann to return the railings, he demanded that Bruce Kahn adhere to a strict payment schedule starting with $1,000 down and $500 due noon every Monday for 16 consecutive weeks until the debt was satisfied.

But the payment schedule hasn't worked out so well. "He wrote me a hot check from court," says Trautmann, who says a $1,000 check drawn on Bruce Kahn's personal account bounced the next morning. "And the first Monday has gone by, and there's been no payment." Bruce Kahn refused to comment for this story.

Trautmann isn't the only one claiming to have been shafted by the Kahns. David Miller of Classic Electric, who did wiring and lighting for the club, says the Kahns owe him more than $14,000 for electrical work he did on the Arcadia (bankruptcy filings peg his claim at $7,500).

"[Steve Kahn] begged us to finish the job. Then he stiffed us," says Miller. "He flat-out ripped us off. If I hadn't borrowed money from my parents, I would have been out of business." Miller claims he was repeatedly snubbed after promises of payment. At one point, Steve Kahn even wrote him a check for $7,600, which bounced after Kahn quickly closed out the Arcadia account, Miller claims.

Miller says he continued to drop by the Arcadia in the hope of recovering at least a portion of the outstanding balance. But when Miller lost his patience with Kahn's foot-dragging on one of those visits, Bruce Kahn kicked him off the premises, threatening to have him arrested for criminal trespassing. "I called him a scumbag," recalls Miller.

Steve Kahn says he is confident the Arcadia will emerge from bankruptcy sometime this summer. But that might not matter. Depending on the course the TABC investigation takes, the Arcadia could very well be stripped of its liquor license.

No telling what the agency has up its sleeve. While it pulled Millennium's license with seeming swiftness, Arcadia's liquor certificate is still active, even in the wake of three misdemeanor conspiracy arrests and one felony charge. TABC investigator Fred Oden's response is provocatively deadpan: "We have not chosen, at this point in time, to extract that license or to have it canceled for cause."

Steve Kahn believes the conspiracy charges are a concoction. He says he and his brother are the targets of a concerted effort by the TABC to slowly bleed the operational nightlife out of them. "They put my brother out of business," he says incredulously. "My brother's never touched a drug, doesn't drink, and he's in bed at 9 o'clock every night. You know what I'm saying.

KEEP THE DALLAS OBSERVER FREE... Since we started the Dallas Observer, it has been defined as the free, independent voice of Dallas, and we'd like to keep it that way. With local media under siege, it's more important than ever for us to rally support behind funding our local journalism. You can help by participating in our "I Support" program, allowing us to keep offering readers access to our incisive coverage of local news, food and culture with no paywalls.
Mark Stuertz
Contact: Mark Stuertz