HOW DOES a seemingly successful restaurant end up with a couple dozen lawsuits filed against it and even an arrest warrant out for its owner?
That's a question on the minds of a number of investors in the wildly popular Six Degrees restaurant on Green Lake. You can barely get a seat at the place, yet people who put money into the venture say they have been unable to get back what's owed them. The restaurant's landlord has gone to court every month for the past six months to get the rent paid, and the state has filed claims for unpaid taxes. Last week, a satellite Six Degrees, opened a year ago in Redmond Town Center, was shut down.
"It's not unusual for a restaurant to have cash flow problems. And honest people can be unable to pay their debts for a while. But to have it come to this is very unusual," says attorney James Cathcart. His client, a local doctor, is suing to recover $35,000 still owed of the $128,000 he loaned in 1997 to help get Six Degrees off the ground.
Cathcart won a judgment against the restaurant in April, and earlier this month Six Degrees' owner Tom Church was supposed to appear in court with copies of his company's financial records. He didn't show, however, and a Superior Court judge issued a civil warrant for his arrest. (Under such a warrant, the cops will not actively seek the individual, but they may haul him into jail if he's stopped for a traffic infraction.)
Neither Church nor his attorney responded to calls seeking comment.
"I've called, written, e-mailed, and never gotten a response," says Margi Ross, who won a judgment against Six Degrees last month. Ross says she knew Church from having worked alongside his wife at Microsoft for 10 years. In 1998, Ross, together with a friend, loaned the restaurateur $25,000, none of which has been paid back. "It's such a frustrating experience," she says.
A YEAR AGO, Six Degrees had two restaurants—one in Green Lake and one in Kirkland—and the company boasted of plans for four more. But just one additional Six Degrees ever opened— at the outdoor mall known as Redmond Town Center. According to a lawsuit filed by Redmond Town Center's owners, the now-defunct restaurant never paid its rent in 2001.
Six Degrees has already been touched by tragedy, which is why some investors are especially emotional over what's happened. Church, an entrepreneur who built (then sold) the Cameras West chain, founded Six Degrees with Rod Pearson, a longtime Seattle restaurateur. On January 31st of last year, Pearson, his wife, and two daughters were all killed on Alaska Airlines flight 261, which crashed into the ocean en route from Mexico to Seattle.
Pearson's childhood friend Connie Walsworth says she and Pearson were "like brother and sister." Now Walsworth and her husband are among the people suing Six Degrees. "I'm a very bitter investor," she says. The experience "has taken a horrible tragedy in my life and made it even worse." Walsworth and her husband have been paid back only a portion of the $20,000 loan that they extended—"out of friendship"—to help open Six Degrees.
Walsworth says that Church told her the restaurant was going to collect on a $500,000 life insurance policy it had on Pearson. "He said, 'Can you hang on till then?' But we never got a penny. He never returned calls." (Court filings show that Six Degrees did make one payment to the Walsworths last year.)
The Walsworths' attorney, Matthew Green, says he's subpoenaed Six Degrees' bank records in order "to figure out where the hell the money went." Another creditor's attorney, Stuart Sinsheimer, says he plans to do the same. But Church has already declined to come to court to disclose his financial records. "If a guy's not even showing up for that," says Sinsheimer, "it means he's got some deep problems."
Six Degrees is certainly not the first restaurant venture that has stumbled when it tried to expand beyond the site of its original success. The question for the restaurant's small circle of investors may now be whether they will share in the good times at Green Lake or pay the price for the crash in the suburbs.