Judge approves Cashell as trustee if needed by gaming action

Tuesday, Feb. 18, 1997 | 11:59 a.m.

But the judge also said that for now the Carson City landmark will remain in possession of general manager Bruce Dewing, who wants to continue running the resort.

The state Gaming Control Board is scheduled to consider the Ormsby House's licensing on Wednesday. The Nevada Gaming Commission will have final say at a meeting Thursday.

U.S. Bankruptcy Judge Gregg Zive said the state regulators have the option of installing a trustee if Dewing's license is denied. Cashell holds a gaming license.

"If he can't get a license, then Mr. Cashell will be appointed trustee," Zive added.

Cashell's appointment was sought by lawyers for Cerberus Partners, which is owed $5.5 million and is the largest creditor in the Ormsby's week-old Chapter 11 bankruptcy protection filing.

Cerberus lawyers Jennifer Smith and Dan Reaser argued that with Ormsby House owner Barry Silverton's gaming license about to expire and the licensing of Dewing up in the air, an alternative was needed to prevent the casino from going dark at midnight Thursday.

Smith argued that keeping the casino open was in the best interest to creditors. "Certainly without the gaming license ... the revenue will drastically deteriorate."

Casino regulators in December harshly criticized Silverton for poor management but granted him a temporary license when he said a sale of the casino was pending.

The sale subsequently fell through. Silverton, sole shareholder of Carson City Corp. which owns the Ormsby House, filed for Chapter 11 bankruptcy protection on Feb. 11, citing about $12 million in debts.

At the same time, Silverton resigned as director, president and chief executive officer. Dewing, hired last spring as general manager, assumed those roles.

The Chapter 11 filing is the second for the Ormsby since 1990, and the latest move in what have been many turbulent months for the club.

Since it reopened under Silverton's ownership in February 1995, the hotel-casino has been dogged by state fines, layoffs, lawsuits for nonpayment of bills and other hassles.

Cerberus lawyers argued that because Silverton is the only shareholder, he would continue to influence operations at the casino, possibly to the detriment of creditors, if Dewing is licensed to control operations.

"The owners are always presumed to have influence," Smith said. "Unless the trustee is in a position to step in ... the Ormsby House will go dark again."

But Carson City Corp. attorney Stephen Harris argued that the appointment of a trustee was premature. He told the judge he has taken steps to ensure Silverton wouldn't interfere in the bankruptcy proceedings, casino operations or potential sale of the property.

"I've nailed his coffin shut," Harris said.

Silverton himself testified that he would play no role if Dewing is licensed.

Harris also argued that under bankruptcy laws, a debtor is entitled to retain possession of his property "until proven otherwise."

Zive agreed, saying Dewing's licensing procedure should proceed without the court's intervention.

Four licensing options will be considered by the Gaming Control Board.

The board could further extend Silverton's gaming license; license him only as a shareholder and Dewing as an officer; license only Carson City Corp. and then appoint Cashell as director; or appoint and license Cashell as a trustee.