Apex, N.C. — A bankruptcy judge has ordered that a popular Apex restaurant close immediately.
Peak Hospitality Group LLC, which owns Peak City Grill & Bar, had sought to have its Chapter 11 bankruptcy filing dismissed, saying that it would be “unable to fund repayment” of its more than $450,000 in federal, state and local tax debt, according to a motion filed with the U.S. Bankruptcy Court of the Eastern District of North Carolina.
But a judge on Wednesday ruled that the business would, instead, close immediately and the case would be converted to Chapter 7 bankruptcy, where a trustee is appointed to sell Peak Hospitality’s nonexempt assets and use the proceeds to pay off creditors.
According to the court order, a review of the company’s monthly financial reports and bank statements from Aug. 22, 2018, to March 31, 2019, revealed “numerous unauthorized transfers” made between Peak and its sole owner and controlling party, Steven Adams, and related businesses owned by Adams known as Shazam LLC.
“The court warned Mr. Adams from the outset of the case that it would brook no accounting discrepancies during the Chapter 11 process,” the court order states. “Yet, he has flouted the court’s orders regarding payroll and cash collateral, resulting in not just gross but intentional mismanagement of the Chapter 11 debtor’s business affairs for his sole benefit. Mr. Adams has created an accounting conundrum with the hundreds of transfers that now must be sorted out by a forensic accountant to determine exactly how much he has been overpaid in contravention of the court’s orders and whether the state and federal taxing authorities have yet again been underpaid while Peak was under bankruptcy protection.
“As a result of Mr. Adams’ financial acrobatics, Peak is in violation of the officer wage order and cash collateral operating orders and has filed inaccurate monthly financial reports in the case to boot.”
Peak Hospitality Group filed for Chapter 11 bankruptcy protection in August, a week after the company and Adams were sued by the Internal Revenue Service.
The IRS sued the company, alleging that they had collected $681,764 in unemployment and Social Security taxes from employees over the past eight years that was never turned over to the government.
Various attempts to recoup the money since 2015, including pulling money from Peak Hospitality’s bank accounts, credit card transactions and accounts receivable, never succeeded in paying off the debt, according to the lawsuit. So the IRS sought a court order to compel payment and wanted to liquidate the company’s assets if it didn’t comply with the order.