Mounting tax debt was too much to handle for Cowboy Ciao, the longtime Scottsdale restaurant that abruptly shut its doors after over 20 years in business in downtown Scottsdale.
Both Cowboy Ciao and Kazimierz, a nearby wine bar that also closed in October, are owned by well-known Scottsdale restaurateur Peter Kasperski and have been under Chapter 11 bankruptcy proceedings since July 2017.
On Oct. 16 – the same day Cowboy Ciao closed its doors – bankruptcy Judge Daniel P. Collins converted the bankruptcies to Chapter 7.
Chapter 11 bankruptcy is rare and typically reserved for large businesses. It involves a complex reorganization effort and can allow the debtor to keep many of their assets, according to Phoenix-based Arboleda Brechner Law Firm.
Chapter 7 is a total liquidation of assets in which all non-exempt assets are sold in order to pay off debt.
It appears the conversion was necessitated by the restaurant's failure to pay mounting tax debt.
Court filings state that “cause exists to convert this case, because, among other things, the Debtors have failed to timely pay accrued post-petition federal and state taxes, and the estate is sustaining losses and diminution owing to the mounting tax administrative expenses.”
It is unclear what the restaurant’s current tax debt is, but bankruptcy filings from July 2017 indicated Cowboy Ciao owed the IRS at least $698,165.67 and the Arizona Department of Revenue at least $219,526.35 at that time.
The original Chapter 11 bankruptcy filing for Cowboy Ciao indicated the company had assets between $500,001 and $1 million and liabilities over $1 million but less than $10 million.
Kasperski did not return a request for comment.
It is unclear how the bankruptcies will affect other entities associated with Kasperski, who has opened a slew of restaurants, bars and other businesses in Scottsdale throughout his career.
Both Cowboy Ciao and Kazimierz were owned by Kasperski through an entity called Spaghetti Western Productions, according to records on file with the Arizona Corporation Commission.
The Cowboy Ciao website currently lists several active projects under the Spaghetti Western Productions banner, including Super Chunk, a bakery and café in Old Town, and Kazzit, an online global wine database and tourism guide that Kasperski co founded.
Despite that listing, Super Chunk appears to be owned outright by Country and Sergio Velador, according to records on file with the Arizona Corporation Commission.
Country Velador is credited as executive pastry chef at both Cowboy Ciao and Kazimierz on the Cowboy Ciao website.
It does not appear Super Chunk is going anywhere.
A post on the official Cowboy Ciao Facebook page announcing the closing encouraged visitors to go to Super Chunk and said Cowboy Ciao’s famous Stetson Chopped Salad will now be on the menu at New Wave Market.
Similarly, records on file at the corporation commission indicate that Kasperski does not have ownership in Kazzit.
Those records show that sole ownership is in the hands of company Founder and CEO Babak Motamedi.
Kasperski is listed as co-founder and resident sommelier on the company’s website.