Trustee wants steakhouse to liquidate after 3rd bankruptcy

The trustee in Spice Modern Steakhouse’s bankruptcy case is asking the court to liquidate the Orlando restaurant after its third bankruptcy reorganization filing in seven years.

Court documents filed in federal bankruptcy court in Orlando by the trustee said the company might have been involved in “criminal activity consisting of underreporting sales and the amount of sales tax due.”

The documents say Spice Modern Steakhouse and parent company Level 1 Inc., owe $262,105 to Florida Department of Revenue for back sales-tax payments. That number has accumulated starting with the company’s first bankruptcy filing in 2009, court records show. The most recent bankruptcy reorganization petition was filed by Spice ownership in November.

Owner Manny Tato said he does not plan to liquidate the company. Tato deferred other questions about the bankruptcy to his lawyer David McFarlin, who did not return a request for comment.

In previous bankruptcies, the company has created a payment plan, only to later file for bankruptcy again.

“The Debtor in this case, Level 1, Inc. filed its bankruptcy petition in bad faith,” said the Chapter 7 motion from acting U.S. Trustee Guy Gebhardt.

If the trustee does manage to convert the case to a Chapter 7 bankruptcy liquidation, Spice Modern Steakhouse business could be dismantled and sold in pieces, said Stetson professor of law Theresa Pulley Radwan.

“If it’s a Chapter 11 reorganization, sometimes the business can be sold as a going concern,” she said. “But when you are in Chapter 7, the most common course is to liquidate the parts.”

Tato, Level 1, Inc. owner and chief restructuring officer, also filed for personal bankruptcy in December with debts of $6.4 million. Part of that debt was another $390,000 in debts to the Florida Department of Revenue.

In the Chapter 7 liquidation motion, Gebhardt’s office said that Level 1 has tried to “thwart the Florida Department of Revenue in its collection efforts.”

“For these reasons, the Court should find that the (bankruptcy reorganization) filing was made in bad faith and convert this case to Chapter 7 to allow an independent Chapter 7 trustee to sell the business ... ” the filing reads.

Most of the restaurant’s debts are those listed to the state, its landlord and an insurance company.

It has continued to pay its 51 employees during the bankruptcy, records show.

Financials submitted in bankruptcy court show Spice Modern Steakhouse is bringing in revenues of $200,000 a month and has a cash profit of $25,367.

Before the bankruptcy petition, Spice Modern Steakhouse was also at risk of losing its alcoholic beverage license from the state Division of Alcoholic Beverages and Tobacco because of its sales tax debts. However, that was put on hold because of the bankruptcy petition.