Onetime socialite Kluge in bankruptcy protection

[June 22, 2011]  RICHMOND, Va. (AP) -- Patricia Kluge, a onetime socialite who had entertained the rich and famous at her sprawling Virginia estate in the 1980s and later tried her hand at building up a national winemaking business, has filed for personal bankruptcy protection with her husband.

A lawyer for the couple, Kermit Rosenberg, disclosed details of the filing Tuesday and added: "They're getting on with their lives, trying to discharge their debts and start over."

In U.S. Bankruptcy Court, Kluge and husband William Moses listed business obligations as their chief debts. The filing estimates their assets between $1 million and $10 million, compared with $10 million to $50 million in liabilities. The couple estimated in the filing in the court in Lynchburg that they have between 50 and 99 creditors.

Kluge acquired the 23,500-square-foot Albemarle House and its 3,000 acres in rural Virginia from her 1990 divorce from billionaire media mogul John W. Kluge, who died in September. It was designed after an 18th-century English country manor with multilevel gardens, fountains, a swimming pool and rustic guest cabin.

In the 1980s, Kluge hosted extravagant events for royalty, corporate chieftains, celebrities and literary figures at the home, which Kluge once said defined her. The 62-year-old Kluge said last year that she no longer lived that life and instead was trying to focus on a winery business she had sought to create with her new husband.

The Chapter 7 bankruptcy petition comes after the failure of negotiations with three principal banks, Rosenberg said Tuesday. The banks had foreclosed on the couple's winery business, their Albemarle House mansion and a neighborhood of luxury homes under development.

Rosenberg said attempts to "structure an overall settlement" didn't succeed. He added the filing places the couple's assets under the control of a court-appointed trustee, who will administer payments to creditors. Kluge and Moses, he said, are scheduled to meet with creditors on July 15.

Bank of America filed a lawsuit against Kluge in U.S. District Court in Charlottesville, alleging that Kluge defaulted on three loans worth nearly $23 million on the brick Georgian home and its grounds. The bank purchased the property for $15.26 million.

The couple also lost their Kluge Estate Winery & Vineyard after defaulting on nearly $35 million in loans from Farm Credit Bank during their effort to build a national wine business during the economic downturn. Reality-television mogul Donald Trump bought most of the business in April, saying he wants to operate the vineyard.

Lender Sonabank took back the couple's upscale Vineyard Estates subdivision for $4.9 million at a January auction after Kluge and Moses defaulted on an $8.2 million loan after few properties on the 511-acre tract had sold. The couple's current home in the subdivision wasn't part of the sale.

To raise cash for the struggling winery, Kluge enlisted Sotheby's last June to conduct an onsite auction of furnishings, antiques and other items, which brought in $15.2 million. An ornate Qing Dynasty Chinese table clock sold for nearly $3.8 million, and worldwide bidders also paid top prices for paintings, furniture and other pieces in the collection. Kluge also liquidated much of her jewelry for about $5 million at a previous sale.

[Associated Press; By ZINIE CHEN SAMPSON]

Zinie Chen Sampson can be reached at ht tps://www.twitter.com/zinie.

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