The power struggle between stockholders and the board of directors of Diamondhead Casino Corporation continues, with Delaware Bankruptcy Court Judge Laurie S. Silverstein’s recent announcement that she will consider in early December a move by the corporation’s creditors to force it into bankruptcy. For the past 20 years, the corporation has attempted to team with a company—including the Trump Corporation– to build a casino resort on 404 acres between in the Bay of St. Louis in Diamondhead, Mississippi.
Last May, a group calling itself the “New Slate” started a website and proposed seven new directors to replace the board. However, the group could not get enough votes to remove the directors.
On August 6, the stockholders, who also are creditors, filed to put the corporation into Chapter 7 bankruptcy, which would require the company’s assets to be sold by a trustee and distributed to creditors. Diamondhead Casino Corporation President Deborah Vitale asked the court to dismiss the petition and requested payment of attorney fees, costs and punitive damages. Alternatively, she asked the court to convert the bankruptcy filing to a Chapter 11.
Vitale said, “This is part two of the proxy contest. That is the company’s position,” she said.
Among the creditors are David Cohen, Arnold Sussman and F. Richard Stark who said in the bankruptcy filing the company is in default of notes to them for a combined $150,000 plus interest. Several more promissory notes are outstanding according to court documents. Vitale said creditors want cash rather than stock since the stock is not trading, but the company has no way to pay them.
