San Antonio Express-News (Sunday)
‘MASSIVE FRAUD’
Courts: Investor accuses Chaco’s owner of making false promises, fabricating financial info.
The ownership group that runs Chacho’s Mexican restaurants in San Antonio envisioned a national chain on par with Chipotle, Panera Bread and Shake Shack, but worth more.
According to a newly filed lawsuit, Chacho’s owner John Burke told a prospective investor in 2016 that it would one day become more valuable than McDonald’s, which has a market value larger than any other restaurant company.
The investor, Roberto Segovia, principal of family-owned Mexican investment company Rhea Capital Inc., now says Burke and two affiliated partnerships carried out a “massive fraud” by making false promises and fabricating financial information to entice investors to invest millions in Chacho’s.
Burke and the others “have engaged in a wide ranging conspiracy to raise millions of dollars from Mexican investors (totaling some $11 million) for the purported expansion of the Chacho’s NA restaurant chain, which rather than expand
Rhea Capital alleges in a lawsuit.
The defendants, meanwhile, have “siphoned off ” the money to amass a real estate portfolio and other assets held in the names of separate companies that appear to be owned by Burke, the suit adds.
The complaint was filed Nov. 25 in state District Court in San Antonio.
The action describes Chacho’s NA as “an empty shell company that
not even the rights to the Chacho’s trade name and brand.”
Rhea Capital seeks unspecified financial damages for the losses it says it has suffered, as well as punitive damages. It also is asking the court to appoint a receiver to take control of Chacho’s NA and/or order an accounting and audit of the chain’s books and records.
Efforts to reach Burke were not immediately successful. He has not yet filed an answer to the lawsuit.
A rocky start
Chacho’s website says it started about 30 years ago but was “pretty unsuccessful” its first decade because it focused on costs rather than quality.
In the late 1990s, the owner (identified on the website only as “me”) says he met a woman from Mexico whom he eventually married.
“She decided our food sucked and said she could make it a lot better,” the website adds.
“And so she was given (or took) full rein to do so. The change was dramatic and sales quickly began increasing. Sales ultimately increased seven-fold until Chacho’s became one of the highest customer count restaurants anywhere.”
Chacho’s business plan con