2016-03-24 / Front Page

Lawsuit details how Steer N Stein loan money was spent

By Ben Meiklejohn
Staff Writer

BIDDEFORD – The Biddeford Saco Area Economic Development Corporation filed suit last month against Harold Royals of Saco over three loans totaling $125,000 that he was given last October to open Steer N Stein restaurant on Main Street.

The corporation alleges in its complaint that Royals and Peter Powers of Scarborough engaged in fraudulent transfer of funds and breach of contract.

Powers was the owner of Alex Parker’s Steakhouse in Gardiner, where he received a $40,000 loan from the city’s revolving loan fund to open the restaurant. Powers closed the restaurant and filed Chapter 7 bankruptcy a year later, without paying back $37,000 to the city. Gardiner City Manager Scott Morelli confirmed that Royals was involved with Alex Parker's Steakhouse, even though Royals was not listed as an owner. Royals told the Courier in December that he had only been there “a couple of times.” However, Royals was listed as a contact for Alex Parker's Steakhouse on its liquor license.

Royals is listed as the sole owner of Burger, Beef & Brews LLC and had planned to hire Powers as the restaurant manager and head chef of Steer N Stein. Burger, Beef & Brews is the limited liability company Steer N Stein operated under.

Attorney Adam Shub, who represents the economic development corporation, said Powers was not an applicant on the loan, which was intended to be spent on improvements at 140 Main St., as well as for business startup costs. The space was formerly occupied for 15 years by another restaurant, Bebe's Burritos & Cantina.

When asked how the corporation concluded that $125,000 was required to improve a space that had been previously occupied by a restaurant for 15 years, or whether a contractor had visited the site to provide an estimate before the loan was granted, William Armitage II, executive director of the corporation, said, “I am not at liberty to answer your questions.”

According to bank statements released by Bangor Savings Bank in court documents at Cumberland County Superior Court, where the complaint was filed, on the day the corporation wired the loan funds to Royals, Oct. 9, a $10,000 check was made out to Powers' mother, Marie Powers. Marie Powers then made the check payable to the order of Kelly Lancaster, who is Peter Powers' sister. Marie Powers and Lancaster are also Scarborough residents.

Marie Powers and Lancaster were originally named as defendants in the complaint, but were dismissed as defendants this month.

“We have already recovered some of the money and we have also recovered much of the equipment,” Shub said. “The $10,000 which was transferred to Marie Powers was recovered and so Powers and Lancaster were dismissed from the case.”

Shub said the equipment that was recovered includes bar stools, televisions and dishwashers. Royals spent $4,203 on Nov. 19 at BizChair.com, a retailer of restaurant furniture. Shub said the total value of the recovered equipment is unknown right now, and the $10,000 recovered from Marie Powers and Kelly Lancaster is the only money that has been returned to the corporation.

“That's the extent of the recovery at this time,” Shub said.

Steve Ebling, owner of 140 Main St., said all the barstools and restaurant equipment are still being stored in the space for the economic development corporation, and that a number of parties have already expressed an interest in opening a restaurant there. Ebling said the corporation will work with the next owner to sell the equipment to them.

“The EDC and us, we're going to try and work with whoever ends up there. All parties are going to work together,” Ebling said. “Somebody could be up and running in a month or month and a half.”

Shub said Royals has not attempted to resolve the issue with the economic development corporation.

“We have not received any communication from Mr. Royals that would suggest to me that he's interested in coming to any kind of resolution,” Shub said.

In the corporation's complaint, Shub states that Royals did not inform the corporation of the $10,000 payment to Marie Powers.

“... the $10,000 payment was made with 'actual intent to hinder, delay or defraud' the Development Corporation by virtue of the fact, for example, that neither Marie Powers nor Kelly Lancaster had any involvement in the restaurant and the money was not used for a stated purpose of the Loans,” wrote Shub.

The bank statements also reveal a schedule of expenditures made with the loan funds that portrays a lavish lifestyle with nearly daily expenditures made among more than 25 restaurants from Portland to Portsmouth, New Hampshire, and totaling more than $14,000, mostly at Run of the Mill in Saco and Portland Pie in Biddeford. In addition to the spending at other restaurants, funds were expended at Your Dirty Dog, a dog cleaning service in South Portland, Maine Red Claws and Portland Pirates in Portland, and New Patriots Stadium LLC in Foxborough, Massachusetts.

On Oct. 19, $307 was spent at LensCrafters, an eyewear shop in South Portland. On Oct. 22, $747 was spent at Frank Galos Chevrolet in Saco. A Jan. 7 trip to Cinemagic & IMAX in Saco was also paid for with loan funds.

There were days when seven or eight different expenditures were made at various restaurants. According to the bank statements, on Nov. 2, Royals and Powers appear to have eaten at Traditions Italian Restaurant in Saco twice, Run of the Mill twice, Sebago Brewing Company in Scarbor- ough twice and Portland Pie.

On Nov. 23, loan money paid for four checks at Run of the Mill, two at Portland Pie and two at Duffy's Tavern & Grill in Old Orchard Beach; $1,000 cash was also withdrawn that same day.

The loan paid for meals and drinks at five different restaurants, or eight total checks, on Dec. 14: Portland Pie, Edge Bar and Kobe Japanese Bar & Sushi Grill in Biddeford, Sebago Brewing Company, and four bills at Run of the Mill.

Eight restaurant checks were also paid with loan funds on Jan. 19, including three at Run of the Mill, two at Portland Pie, and additional bills at Traditions Italian Restaurant, Los Tapatios, in Biddeford, and Tilted Kilt Pub in South Portland.

Oct. 9, Marie Powers, $10,000.
Oct. 12, Your Dirty Dog, South Portland, $53.68; Local 188,
Portland, $76.92.
Oct. 13, Portland Pie, Biddeford, $67.23; LongHorn Steakhouse, Biddeford, $74.77.
Oct. 14, Cumberland Farms, Windham, $71.73.
Oct. 15, Sebago Brewing Company, Scarborough, $45.88;
McKee Billings LLC, $1,000.
Oct. 19, Circle K, Biddeford, $69.62; LensCrafters, South
Portland, $307.95; Kennebunkport Inn, Kennebunkport,
Oct. 20, PrestoSports, $122.98; Portland Pirates, Portland,
Oct. 21, cash withdrawal, $1,000; Federal Jacks, Kennebunk, $29.70; Run of the Mill, Saco, $64; Maine Red Claws,
Portland, $73.58; Minor League Ball, Florida, $103.34.
Oct. 22, Frank Galos Chevrolet, Saco, $747.78.
Oct. 23, Congress Bar & Grill, Portland, $72.36.
Oct. 26, Portland Pie, $28.30; Kobe Japanese Grill & Sushi
Bar, Biddeford, $73.72; Run of the Mill, $91.76 and $112.88.
Oct. 27, Run of the Mill, $24.50; Portland Pie, $52.05; Kerrymen Pub, Saco, $74.22.
Oct. 28, Burger Bar LLC, Portsmouth, New Hampshire,
$50.51; Springvale Publick House, Springvale, $51.12; Run
of the Mill, $63.46; USCC Call Center, Chicago, Illinois,
Oct. 29, Portsmouth Gas Light, Portsmouth, New Hampshire, $35.98; Run of the Mill, $105.91.
Oct. 30, Portland Pie, $63.98; British Beer Company,
Portsmouth, New Hampshire, $73.21.
Nov. 2, Traditions Italian Restaurant, Saco, $18.39 and
$105.91; Run of the Mill, $30 and $32; Portland Pie, $60.75;
Sebago Brewing Company, $69.10 and $76.76; Prep Sportswear, $89.22; ATM withdrawal, $402.25.
Nov. 3, Local 188, $119.94.
Nov. 4, Traditions Italian Restaurant, $50.39, Run of the
Mill, $85.55.
Nov. 5, Run of the Mill, $73.50; New Patriots Stadium
LLC, Foxboro, Massachusetts, $107.45.
Nov. 6, Shop.MLB.com, $73.92; Run of the Mill, $96.19.
Nov. 9, Sunoco Gas Station, Biddeford, $75.01.
Nov. 12, Run of the Mill, $9 and $97, Sebago Brewing
Company, $44.88; Three Dee's Variety, Biddeford, $66.46;
Boston ProShop, $81; Portland Pie, $120.95.
Nov. 13, ATM withdrawal, Biddeford, $500 and $500;
Cumberland Farms, Saco, $69.93; Applebee's, Biddeford,
$78.91; FRG Fanatics.com, $291.94.
Nov. 16, ATM withdrawal, Scarborough, $303; Run of the
Mill, $41, $100.78 and $117.09; Prep Sportswear, $187.55.
Nov. 17, Cumberland Farms, $71.43; Portland Pie, $28.68;
Run of the Mill, $32; Central Provisions, Portland, $96.
Nov. 18, Run of the Mill, $32 and $48.50.
Nov. 19, Run of the Mill, $115.31.
Nov. 20, Run of the Mill, $8.50; Portland Pie, $10.64.
Nov. 23, Cash withdrawal, $1,000; Portland Pie, $41.58
and $59.67; Duffy's Tavern & Grill, Old Orchard Beach,
$51.15 and $108.62; Run of the Mill, $53, $57.68, $66.70
and $85.50.
Nov. 24, Portland Pie, $40.39.
Nov. 25, Ruby Tuesday's, Biddeford, $72.10; Portland Pie,
$73.56; Run of the Mill, $95.38.
Nov. 27, Ruby Tuesday's, $117.83; Run of the Mill, $171.64.
Nov. 30, Run of the Mill, $31, $65 and $104.83; Portland
Pie, $46.38.
Dec. 1, ATM withdrawal, $400; Run of the Mill, $32; Applebee's, $106.92; USCC Call Center, $120.55.
Dec. 2, Portland Pie, $20.66 and $67.69; Run of the Mill,
$32 and $77.

Dec. 3, Three Dee's Variety, $66.01; Tortilla Flats, Portland, $79.93; Portland Pie, $87.43; ATM withdrawal, $400.
Dec. 4, Run of the Mill, $110.72.
Dec. 7, Cumberland Farms, Scarborough, $70.77; Edge
Bar, Biddeford, $18.04; Portland Pie, $18.66 and $65.62;
Traditions Italian Restaurant, $43.10; Run of the Mill,
$48.50 and $72.37.
Dec. 8, Ruby Tuesday's, $61.40; Sebago Brewing Company,
Scarborough, $62.11; Portland Pie, $64; Sea Dog Brewing
Company, South Portland, $67.25; Cumberland Farms, Saco,
Dec. 9, Run of the Mill, $65.
Dec. 10, Run of the Mill, $126.38.
Dec. 11, Run of the Mill, $92.03.
Dec. 14, Three Dee's Variety, $66.51, Portland Pie, $18.66;
Run of the Mill, $32, $64, $64 and $189.17; Edge Bar,
$33.05; Kobe Japanese Bar & Sushi Grill, $63.46; Sebago
Brewing Company, $87.17.
Dec. 15, ATM withdrawal, $200; Three Dee's Variety,
$37.32; Run of the Mill, $117.74.
Dec. 16, Run of the Mill, $51.50; Portland Pie, $60.21.
Dec. 17, Run of the Mill, $46 and $49.31; Congress Bar &
Grill, $69.32.
Dec. 18, cash withdrawal, $200; Portland Pie, $10.64 and
$57.58; Run of the Mill, $122.33.
Dec. 21, Three Dee's Variety, $71.12; Run of the Mill, $64,
$79.50, $96.50 and $110.34.
Dec. 22, Portland Pie, $38.32; Run of the Mill, $123.68.
Dec. 23, Portland Pie, $52.19; Run of the Mill, $84.20.
Dec. 24, Three Dee's Variety, $81.97; Run of the Mill,
Dec. 28, 7-Eleven, Biddeford, $89.30; Run of the Mill, $40,
$50.50, $88.71 and $89.60; Portland Pie, $54.98; Rosie's
Restaurant, Portland, $83.70.
Dec. 29, Run of the Mill, $126.92.
Dec. 30, Portland Pie, $34.18; Sea Dog Brewing Company,
$72.45; Run of the Mill, $79.50.
Dec. 31, Three Dee's Variety, $81.51; Los Tapatios, Biddeford, $68.86; Run of the Mill, $83.83.
Jan. 4, Three Dee's Variety, $61.06 and $69.51; Run of the
Mill, $51.04, $97 and $128.
Jan. 6, Portland Pie, $68.27; Sebago Brewing Company,
Scarborough, $74.09.
Jan. 7, ATM withdrawal, $200; Three Dee's Variety, $75.85;
Run of the Mill, $10 and $108.90; Portland Pie, $18.66;
Cinemagic and IMAX, Saco, $21.45 and $30.
Jan. 8, Run of the Mill, $31 and $50.50.
Jan. 11, Congress Bar & Grill, $26.04; Run of the Mill,
$77.61 and $79.40.
Jan. 12, Run of the Mill, $25.50 and $101.86.
Jan. 13, Coastal Discount Beverage, Biddeford, $68.95;
Run of the Mill, $97.
Jan. 14, Three Dee's Variety, $71.51; Run of the Mill,
$49.31 and $77.10; Bua Thai Restaurant, Old Orchard
Beach, $74.91.
Jan. 15, Three Dee's Variety, $37.04; Run of the Mill, $32;
Portland Pie, $54.98.
Jan. 19, Run of the Mill, $15.50 and $31; Los Tapatios,
$65.05; Portland Pie, $65.58 and $68.23; Traditions Italian Restaurant, $81.07; Tilted Kilt Pub, South Portland,
$125.30; Run of the Mill, $127.50.
Jan. 20, Run of the Mill, $92.30.
Jan. 21, Run of the Mill, $158.46.
Jan. 22, Portland Pie, $37.32; Run of the Mill, $57.
Jan. 25, ATM withdrawal, $400; Three Dee's Variety,
$94.36; Portland Pie, $46.96; Run of the Mill, $64.81, $69,
$74.10 and $87.17.
Jan. 26, Three Dee's Variety, $107.69; Run of the Mill,
Jan. 27, Run of the Mill, $31.19 and $52.50; Portland Pie,
$37.32; Ruby Tuesday's $92.06.
Jan. 29, Coasters, Biddeford, $18.04; Run of the Mill,
$80.88; Los Tapatios, $87.14.
Feb. 8, cash withdrawal, $2,800.

A partial listing of expenses made by Harold Royals, of Steer N Stein, using a $125,000 loan provided by the Biddeford Saco Area Economic Development Corporation. Royals spent the entire $125,000 and never opened the restaurant. He is now being sued by the corporation.

Other restaurants frequented on the four-month eating spree include LongHorn Steakhouse, Applebee's, Ruby Tuesday's and Coasters in Biddeford; Kennebunkport Inn in Kennebunkport; Federal Jacks in Kennebunk; Congress Bar & Grill, Local 188, Central Provisions and Rosie's Restaurant in Portland; Kerrymen Pub in Saco; Burger Bar, Portsmouth Gas Light and British Beer Company in Portsmouth, New Hampshire; and Springvale Publick House in Springvale.

Additionally, numerous purchases were made at stores that sell alcohol and food supplies, such as Cumberland Farms, Three Dee's Variety and Coastal Discount Beverage, even though Steer N Stein never officially opened to serve one drink or meal.

In an affidavit submitted to the court, Armitage II, executive director of the development corporation, stated, “Thousands of dollars spent by Royals was inconsistent with the purpose of the Loans … In addition to the $10,000 paid to Ms. Powers and then transferred to Ms. Lancaster, the bank statements indicate that more than $14,000 was spent at restaurants. These expenditures violate the stated purpose of the loans.”

The complaint also referenced an Oct. 15 payment of $1,000 to McKee Billings LLC, a law firm in Augusta. Attorney Walter McKee said he could not disclose the nature of the payment because of attorney-client confidentiality.

In a subsequent motion for a trustee process against defendants' properties, Shub argued that Marie Powers and Kelly Lancaster had no role with the restaurant and provided no services to justify a $10,000 payment from the loan funds.

“The only link between them and the restaurant is Peter Powers. There is simply no justification for this cash payment on the day of the loan closing,” Shub wrote. “Mr. Royals reasonably should have known that gifting $10,000 to his head chef's family would cripple the restaurant's ability to complete the improvements, timely open the restaurant and make payments on the Loans.”

Armitage stated in his affidavit that Royals blamed the landlord, Ebling, for cost overruns and delays in the restaurant's opening, originally scheduled for the end of February.

Ebling said the accusations were “completely false.”

“They basically were never in there and working at all,” Ebling said. “We did all the general contracting.”

On Feb. 12, a post on Steer N Stein's Facebook page claimed that all the plumbing in that section of the building needed to be replaced, and the restaurant's opening would be delayed even further because of it.

“We now have to replace all the plumbing, from incoming water to outgoing sewer,” the post read.

Ebling said, “The only thing they did – we took out the existing plumbing where the existing sinks were, to make it easy for the transition (because the kitchen was redesigned). It's probably about $400 or $500 worth of work. All the drains are still there. It just needs to be rerouted.”

Ebling said he and contractors wondered why Royals didn't work on the kitchen first. Instead, said Ebling, Royals saved the kitchen for last and then ran out of money.

“You would have thought they'd do the kitchen first,” Ebling said.

Royals did pay all the contractors, Ebling said, except for one woodworker who is owed “a little bit of money for the bar.”

“He will be compensated,” Ebling said.

In December, when the Courier interviewed Royals, a line of customers waited to pay for membership in a mug club at Steer N Stein for $35. Shub said recovery of mug club costs for customers is not part of the economic development corporation's suit.

Ebling said he believes the next restaurant owner at the space will be willing to honor the Steer N Stein mug club that people paid in advance for.

“Whoever opens it up will honor that,” Ebling said. “We will completely be working with anyone. They're going to get very loyal customers right off the bat.”

In his affidavit, Armitage said Royals emptied out the account on the same day a loan payment was due to the corporation.

“Mr. Royals did not mention the money spent on meals which, to my understanding, he dined with Mr. Powers,” Armitage stated. “Shortly thereafter, on Feb. 8, (Royals) reduced the account balance to zero. Harold Royals made out a check to 'cash' in the amount of $2,900.”

In the motion for a trustee process against defendants' properties, Shub stated, “In January, when Burger & Brews met with the Development Corporation it failed to mention the transfer or the exorbitant money spent on meals and other personal expenses. Instead, Royals and Peter Powers represented there was $16,000 to $19,000 remaining in the bank account. This was an outright misrepresentation as the bank records demonstrate roughly a $5,000 balance at the time.

“There is no dispute that Burger & Brews, Harold Royals and Peter Powers spoiled themselves with the loan proceeds from the beginning never intending to honor the loan terms. The amount – more than $14,000 – spent on meals is astonishing given the stated purpose of improving the premises and opening the restaurant.

“Royals and Powers further deceived the Development Corporation by misrepresenting the account balance … Just days later, Royals emptied the Burger & Brews (account) when he wrote a check in the amount of $2,900 to 'cash' on the same day the loan payments were due.

“There is simply no question that the Defendants – given the history of personal spending, a fraudulent payment to insiders, misrepresentations to the Development Corporation, and emptying the company account – will hide assets and money that may be used to satisfy a judgment. In sum, these facts overwhelmingly demonstrate that a clear danger exists that the Defendants will conceal property or dissipate their bank accounts if notified.”

Economic and Community Development Director Daniel Stevenson said the city has a pool of money, from Community Development Block Grants, that can be used for loans, but since the city doesn't have the in-house capacity to underwrite loans, it works with the Biddeford-Saco Area Economic Development Corporation to service such loans.

“We do that through an agreement,” Stevenson said. “We contribute to a CDBG pool fund for micro-enterprise funds.”

Stevenson said of the $125,000 loans to Royals, $20,000 of that came from the city.

“The way it works right now, while there's a pending lawsuit, what we do is wait and let that process happen and see how it plays out,” Stevenson said. “It's in the city's interest, we would want to get whole again, but we also have to be patient and let the court process play out.”

Stevenson said the city contributes about $20,000 each year to loans underwritten by the development corporation, and that a loan of this amount getting defaulted on is not usual.

“We're just trying to be patient. This is the first time anything like this has happened,” he said. “It seems to me this is a lot different.”

“We'll look back on it as a learning experience,” said Ebling.

Royals did not respond to requests for comment.

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