Wednesday, Feb. 16, 2011 | 2:39 p.m.
- CityCenter sides with Longoria, Beso against dismissal of bankruptcy case (2-5-2011)
- Legal battle heats up over finances of Eva Longoria’s Beso nightclub at CityCenter (1-12-2011)
- Eva Longoria sued by former partner over Beso nightclub at CityCenter (1-11-2011)
- Eva Longoria’s Beso files bankruptcy to restructure debt (1-6-2011)
Eva Longoria's Beso restaurant and Eve nightclub on the Las Vegas Strip is in worse financial shape than previously reported and faces eviction if it can't get its finances straightened out.
That's according to an attorney for Beso's landlord, the Crystals mall at the CityCenter casino resort complex co-owned by MGM Resorts International.
Beso, which filed for Chapter 11 reorganization Jan. 6, at the time reported it had debt and other liabilities of nearly $5.7 million, including $1.737 million in back rent owed to Crystals.
Crystals' attorney in the case, Nile Leatham of the Las Vegas firm Kolesar & Leatham Chtd., said during a Beso bankruptcy court hearing Wednesday that Beso actually owed some $2.3 million in rent when it filed for bankruptcy.
Wednesday's hearing was called so Bankruptcy Judge Mike Nakagawa could hear arguments from a disgruntled Beso investor, Mali Nachum, that the bankruptcy case should be dismissed because Nachum maintains it was filed in bad faith.
As a backstop position, Nachum's attorneys are asking Nakagawa to at least lift the bankruptcy filing's automatic halt of outside litigation.
That way, Nachum could continue with her state court lawsuit against Beso in which she claims to be owed $400,000 by the business.
CityCenter has sided with Beso in arguing that the bankruptcy court is the best place for Beso to resolve its many financial challenges and Leatham reiterated that support Wednesday.
He said CityCenter had initiated eviction proceedings against Beso before the bankruptcy and remains frustrated at Beso's inability to pay rent.
Besides the Nachum litigation, Beso faces liens from contractors that built the club and restaurant and a largely-unpaid $634,000 judgment from a second former investor, Anthony Vicidomine. He won that judgment to resolve a lawsuit over Beso buying out his investment in the business.
All of these things need to be worked out in bankruptcy court or Beso will be out of business and litigation will continue until everyone involved is worn out, Leatham warned Wednesday.
"There will simply be an eviction. The property will close. Employees will be laid off. Lawsuits will be filed,'' Leatham said.
Beso LLC's attorney, Lenard Schwartzer of Schwartzer & McPherson Law Firm in Las Vegas, noted the business has 150 employees and had nearly $14.6 million in gross income last year.
"There's a real business here to save,'' Schwartzer told Nakagawa. Schwartzer said that besides restructuring its liabilities in bankruptcy court, Beso will seek to recapitalize itself during the bankruptcy process.
Las Vegas attorney Matthew Pawlowski of the firm Callister + Associates, representing Nachum, said the case should be thrown out of bankruptcy court because Longoria and other investors first wrongly removed Nachum from the company and then excluded her as an investor from a meeting where the investors voted to put the company into bankruptcy.
Nakagawa offered no hint on how he would rule, but said he plans to do so on or before March 2. The judge did get Pawlowski to acknowledge the bankruptcy court is as qualified as Clark County District Court to sort out complex business disputes like this one.
The litigation in Clark County District Court -- stayed by the bankruptcy -- focuses on claims Mali Nachum was wrongly removed as Beso's manager in May 2010 and that Beso has failed to pay her some $400,000 she and her husband Ronen had invested in the company.
The Nachums say they got involved with the Las Vegas business after Ronen Nachum in 2006 successfully oversaw construction of Longoria's Beso restaurant in Hollywood.
Attorneys for Longoria, Beso and the co-defendants filed a counterclaim in that case against the Nachums, saying the validity of their ownership interest "is in question because of the existence of irregularities and certain improprieties which may have been committed" in connection with the initial grants of their interests.
The counterclaim says Ronen Nachum was permitted to help oversee the construction of Beso in Las Vegas in early 2009 based on his representation that he was a licensed contractor, though Beso says he has never been so licensed in Nevada.
"Due in large part to Ronen Nachum’s mismanagement of the construction process, Beso LLC was forced to request an additional contribution in the form of a $1 million loan by Longoria," the counterclaim says.
It says Ronen Nachum’s "serial mismanagement" of the construction led to the filing of $1.2 million in construction liens, along with lawsuits and multiple breaches of Beso’s lease with Crystals.
The counterclaim also alleged: "From the outset of their involvement with Beso, the Nachums operated as though they were members of a criminal enterprise rather than investors in a restaurant and nightclub. Although Ronen Nachum was not himself a member of Beso LLC, he nevertheless acted as the de facto owner of Beso through the assistance of Mali Nachum, using his access to engage in a chronic pattern of theft, intimidation and brutal mismanagement of the business.''
In disputing these allegations, attorneys for the Nachums say Beso is the party that has wrongly withheld money from the Nachums by failing to repay them for their loans and investments to the company.
Attorneys for the Nachums also say Beso was "operating at a huge profit margin" while they were managing the restaurant and nightclub.
But after the Nachums were removed from the business in May 2010, the new management "effectively ran the restaurant in to the ground," a Nachum court filing says.