BUFFALO NEWS INVESTIGATION
City Hall's costly entry into the restaurant business
Development agency helped finance and manage short-lived restaurant that has left taxpayers stuck with the bill
Bankers on a city board told local basketball star Leonard Stokes “no” when he asked to borrow $120,000 from City Hall to start an upscale restaurant.
Too much risk. Too little private money. Not enough experience on the resume.
But City Hall bureaucrats replied “yes” to the then 26-year-old Stokes. They cobbled together $160,000 in loans and grants to help him launch One Sunset, his Gates Circle restaurant.
And they didn’t stop there.
One of the city’s top economic development officials did everything from handling cash receipts to negotiating with vendors to decorating restaurant bathrooms.
“She was there more than Leonard was,” said Jeff Wright, a former bartender, of Michelle M. Barron. Barron is vice president of neighborhood economic development for the Buffalo Economic Renaissance Corp., City Hall’s development agency.
“When I needed money for a liquor order . . . I’d have to text her — never Leonard. Always her,” added Aaron Ingrao, another former bartender.
One Sunset, which occupied the Delaware Avenue address that was once home to the Locker Room, closed in December after barely one year in business. The restaurant was a financial disaster.
Stokes defaulted on $160,000 in city and county loans and grants, and state agencies and local businesses are seeking unpaid taxes and wages, overdue bills and missing equipment. Stokes is also out almost $150,000 in his own money, he said.
The debt is Stokes’ to pay. But a Buffalo News investigation found BERC, the city development agency chaired by Mayor Byron W. Brown, may be the bigger culprit.
“These people should have never opened a restaurant for him,” said Sam Reda, a consultant who was recruited by Barron and Ellicott Council Member Brian C. Davis to help Stokes.
“He had no background in the business, period,” Reda said. “She [Barron] was involved trying to make this kid look like a successful entrepreneur. But they didn’t know what to do.”
The News investigation into One Sunset included a review of public documents and internal records and e-mails, and interviews with two dozen people.
The News investigation found:
• The restaurant was premised on a faulty business plan — partly drafted by Barron. The plan claimed Stokes worked as a general manager at the Montgomery Inn, an iconic Cincinnati restaurant famed for its barbecued ribs. In reality, he worked in the kitchen.
• After bankers and others on BERC’s large loan committee rejected Stokes’ loan request, BERC employees approved smaller loans and a grant whose amounts exempted the proposal from further banker scrutiny. The money totaled $110,000, almost as much as the $120,000 rejected by the bankers.
• Although One Sunset was located in the Delaware District, the restaurant’s $30,000 grant came from federal anti-poverty money allocated to Davis for his Ellicott Council District.
• Delays and money problems plagued One Sunset from the start. The opening was pushed back months while Stokes waited for a liquor license. Even before the opening, the landlord sued for unpaid rent. Sales tax went unpaid. So did bills from vendors. Telephone service was cut off the month after the restaurant opened.
• Barron, the agency’s vice president, helped run the restaurant. She wrote checks, dealt with the bookkeeper and payroll company, and did trouble- shooting with vendors demanding payment for overdue bills.
• City officials, including Barron, urged the Erie County Industrial Development Agency to loan the restaurant $50,000 without disclosing the restaurant was on the brink of closing. The IDA made the loan without checking financial statements or public documents showing One Sunset was in trouble.
• Claims against the restaurant top $235,000. There’s $160,000 owed to city and county agencies. The state Department of Taxation and Finance obtained a $21,754 lien for unpaid sales tax receipts. The state Labor Department imposed a $15,037 penalty for failing to pay wages to four former employees. Two vendors obtained judgments for $16,213. The restaurant owner who occupied the building before One Sunset is suing to recover $43,975 in equipment and furniture. There’s at least three months’ rent totaling $10,500 that Stokes’ landlord said remains unpaid. Reda, the consultant, wasn’t paid for months and says he’s owed at least $6,000.
Barron said she offered Stokes “just standard routine” help, similar to what she gives other businesses. She denied a hands-on role with One Sunset.
Stokes said he is “grateful” for City Hall’s help.
“I will try my hardest to rectify things,” he said. “I’m an entrepreneur, a young person. It’s a business venture that failed.”
Mayor Brown refused to comment on the failed restaurant. Also refusing to comment was Davis, who represents the Council on the BERC board.
First loan rejected
Leonard Stokes was one of Western New York’s greatest high school basketball players.
He led Turner-Carroll High School to state championships in 1998 and 1999, and was named the state’s top player in his senior year.
The 6-foot-6-inch guard went on to star at the University of Cincinnati, where he became one of the top 20 scorers in the school’s history.
Stokes played on National Basketball Association development league teams in Asheville, N. C., and Fort Myers, Fla., but returned to Buffalo in 2006 to help care for his ill mother.
He still harbored NBA hopes, but while in Buffalo, looked for other opportunities. He chose the restaurant business. And he got plenty of help from people interested in the well-liked basketball player, who has remained a source of pride in his community and throughout Buffalo.
In April 2007, Stokes went before the city development agency with his plan for a fine-dining restaurant offering an elegant atmosphere as well as take-out service, and a theater room that would be booked for boxing matches and other sporting events. It also would offer a soul food brunch — $25 for adults and $12 for children — that would include gospel performances.
The project had a $260,000 price tag. Stokes asked for a $120,000 loan. He was going to put in $30,000. He also offered his experience from having worked summers as general manager at the landmark Cincinnati restaurant — a claim that proved to be false.
The agency’s large loan committee — made up mostly of appointed bankers and other volunteers from the private sector—rejected Stokes’ request.
For starters, Stokes couldn’t get a required bank loan to cover at least half the cost of the project, agency officials said.
Nancy LaTulip, a banker on the large loan committee, said she and her colleagues had other misgivings. Stokes had no experience running a restaurant, and his application indicated he would be traveling a lot.
Two successful restaurant operators who reviewed Stokes’ business plan for The News concluded One Sunset’s revenue and expense projections were unrealistic.
What’s more, the restaurant plan lacked a clear identity and misread its market, they said.
“What family of four would spend $75 for Sunday brunch?” one restaurateur asked.
The News obtained a draft copy of the restaurant’s business plan, and related e-mails, that show Barron participated in its development early on.
Barron and Stokes denied she helped write the plan.
In June 2007, a few months after the initial denial, Stokes returned with a scaled down, $120,000 proposal. This time he said he’d put in $80,000 of his own money. He asked for a $40,000 loan.
Smaller loans approved
This time, his request went to a different committee: the small-loan committee comprising Barron and three other BERC staffers. No bankers.
This committee could approve loans up to $40,000. That’s what it did.
Along with the money though, the agency encouraged Stokes to take a course on running a small business recommended for entrepreneurs accepting city loans. He never took it, although he did confer with the instructor.
One of the things that impressed the small-loan committee about Stokes’ revised plan was that he brought on board his own consultant, Reda, formerly a chef at the Buffalo Chophouse.
Councilman Davis contacted Reda. “Davis said, ‘Meet me at BERC. They want to open this restaurant with this basketball player,’ ” Reda said.
At the meeting, Davis and Barron asked him to help Stokes open the restaurant — even though he had not yet met Stokes, Reda said.
Reda agreed, but progress was slow. Stokes had hoped to open One Sunset by mid-2007. However, it took longer than he expected to get a liquor license.
Meanwhile, Stokes was falling behind in his rent payments.
Then, in September 2007 — even before receiving his $40,000 loan — BERC gave Stokes the $30,000 grant. That money came from funds originally earmarked for the Ellicott District.
The grant was designated for furnishings. Everything had to be replaced — carpet, furniture, bar stools, Stokes said.
Barron was involved in it all. Reda was puzzled by her role.
“I sat down with her and brought in vendors, and she was negotiating,” he said. “She filled out his paperwork and applications.”
Reda concluded BERC was helping run the business.
“He couldn’t get it done by himself,” Reda said of Stokes.
Early on, Barron exchanged e-mails with a vendor about bar stools. “What’s the turnaround time for ordering bar stools,” Barron asked a Details Contract Furnishings agent in a Sept. 10, 2007, e-mail message.
Barron later helped decorate the restaurant, Reda said.
“She was there every day painting stools, decorating the bathroom,” he said.
One Sunset opens
Stokes’ liquor license finally arrived in December 2007. Three days later, so did the $40,000 loan. Stokes said the money went quickly. “It didn’t really do much,” Stokes said. “It was gone in four days.”
Mayor Brown was on hand at One Sunset’s opening ceremony in mid-December.
“It’s young entrepreneurs like Leonard that are so important to the revitalization of our economy, and I am looking forward to seeing his venture grow and be successful,” Brown said at the time.
The bills, meanwhile, piled up.
A month after the restaurant opened, One Sunset asked BERC’s small-loan committee for another $40,000. One source said food suppliers were threatening to no longer deliver because they had not been paid for previous orders. Even the phone service was shut off.
By the end of its first month in business, the restaurant had lost more than $88,000, according to a financial report dated the following July.
On Jan. 12, the loan committee, after some rancor, approved the second $40,000 loan, bringing Stokes’ total loan to $80,000.
Financial problems continued.
In May, Sysco Food Services of Jamestown got a judgment against One Sunset for $8,447.
Budget Blinds e-mailed Barron threatening to go to court over a breached payment agreement.
Unpaid sales tax the restaurant owed the state totaled more than $17,000.
Barron’s presence at the restaurant also continued.
“She made sure we were paid,” said Ingrao, one of the bartenders. “She wrote all the checks for everything.”
In fact, when the phone service was cut, Reda said, he called Barron, then drove to City Hall, where she handed him a money order to pay the $400 bill.
Barron’s e-mails also showed her involvement with the restaurant’s bookkeeper, trying to figure out how to deal with vendors demanding payment of overdue bills.
“All of the creditors need to be contacted regarding a payment plan,” she wrote in one e-mail.
Stokes dismissed accounts Barron played a hands-on role in the restaurant’s operation as “flat out rumor.”
“She would come in and give guidance. Pop in on weekends. See how it was going,” he said. “Her thing may have been getting too close to the staff.”
Barron said she made only occasional visits to the restaurant in an official, arms-length capacity.
Despite the financial pressure, Stokes didn’t give up.
He said he spent an additional $67,000 of his money, on top of his initial $80,000 investment.
“I’m looking at it, and I’m thinking, ‘There’s hope.’ It was my first venture, so I kept pushing,” he said.
Barron kept pushing, too.
Plenty of bills left
In the summer of 2008, Barron lobbied for One Sunset to get yet more government help, this time a minority entrepreneurial loan from the Erie County IDA.
The loan was a “last stand” to keep the restaurant open. “We were majorly in the hole at that time,” Stokes said. “I could stay open with an infusion.”
Barron was one of two BERC officials on an IDA advisory committee, and she pushed for the loan. She did not mention the restaurant was losing money, IDA officials said.
The IDA in August approved a $50,000 loan for One Sunset, one of 10 businesses to get a loan out of about 70 businesses that applied.
“At this point I was not aware of any problems financially,” Barron said of the restaurant’s financial condition.
Stokes received the $50,000 on Aug. 27. His first loan repayment to the IDA in September cleared. His second payment, in October, bounced.
By late October, Kevin Brinkworth, Stokes’ landlord, hadn’t seen a rent check in several months, either. So he initiated eviction proceedings.
Davis wrote a check for $3,500 to cover the November rent, and Brinkworth backed off.
The check bounced. The restaurant closed in early December 2008, leaving behind a stack of unpaid bills.
“I personally think Leonard Stokes is a pretty honorable kid,” Brinkworth said. “But I don’t think he had a clue what he was doing. I think people took advantage of him.”
plakamp@buffnews.com and jheaney@buffnews.com
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