266564 WHITE - CITV CLERK COlII1C11 �VV�Vy
PINK - FINANCE GITY OF SAINT PAUL
� CANARY - DEPARTMENT File NO. �� �� a
BLUE -MAVOR
; � - � � C un 'l Resolution
Presented By �
Referred To Committee: Date
Out of Committee By Date
WHEREAS, E.D.M. , Inc. d/b/a The Crusader Lounge at
1201 Payne Avenue, St. Paul, has made application to
transfer its On Sale Intoxicating Liquor License to MWWB,
Inc. , at the same address; and
WHEREAS, Messrs. Robert Schoenecker, Paul Schoenecker
and Armand Schoenecker are the principal officers and
directors of E.D.M. , Inc. ; and Messrs. Mark Wa.11raff and
Bruce Weinard are the officers and directors of MWWB, Inc. ;
and
WHEREAS, the License Inspector recomm�ded denial of
the license trar�sfer application on f�.ve grounds:
1. The transferor has not filed an affidavit pursuant
to St. Paul Legislative Code 390.08(c) and (�) relative to
.���.���:.z���� P���-.� �..��a ax�d to �e ,s��S:���n o� con-
� tractua.� nb��fga��e�-�-�:�vo�v�.�g ����r�•���it programs.
.,� ;
- 2. The trans€exors aad. ltransf�rees �.ave not supplied
the Li�e�s� Inspt�t� wit�' either the original or a copy of
a handwritten "e�e�t m��ey contract" signed by all four
parties, dated on or about July 28, 1975.
3. The transferors, knowing that the reasonable value
of the right to transfer a liquor license is $20,000 or more,
and with kra.owledgE that the�r outstanding debts are approxi-
mately� $180,000 are s�eking to transfer the license for a
stated amount of $1,75fl, intending thereby that at least one
of their creditors sha11 receive substantially less in satis-
faction of his debts. The transferees, with knowledge of all
of these facts, are aiding and abetting such transfer attempt.
COUNCILMEN
Yeas Nays Requested by Department of:
Christensen
Hozza In Favor
Levine
Rcedler Against BY
Sylvester
Tedesco
President Hunt
Adopted by Council: Date Form Approved by City Attorney
Certified Passed by Council Secretary BY
By
Approved by Mayor: Date Approved by Mayor for Submission to Council
BY BY
.. - ������
, .
4. Both transferors and transferees, by attempting
to obtain approval by the City Council of such transfer
under these circumstances would (in the event such trans-
fer is approved) expose themselves, the City, and indi-
vidual members of the Council to potential civil and
criminal liability. Cf. 18 U.S.C. � 152; 11 U.S.C. � 107.
5. The incredible difference between the actual sale
price and the reasonable value of the right to transfer this
license creates a factual presumption that the parties have
agreed on additional consideration for the transaction, the
nature of which has been withheld from the License Inspector.
At least one of the additional agreements disclosed in
interviews, but not by the application papers submitted by
the parties, is the hiring of Robert Schoenecker by the
transferees as a bartender after the transfer; ;��d
���*��..�he.:Lic.ens�.InS.gecto� c�cailed var�itte� notice to
Mr. Rober� S�����'�er,-���P"re�ident, E.I7.M. , Inc. ; with copies
to Mr. Star�.ley Mosio, Attorney at Law, Messrs. Mark Wallraff
and Bruce Weinard, and to various government officials; and
WHEREAS, the said written notice stated that a public
hearing would be held December 10, 1975, before the License
Committee in Room 707 City Hall, at 9j�00 a.m. , at which hearing
the License Inspector would recommend denial of the transfer
of the license based on five grounds set forth in the notice,
as reproduced above; and
WHEREAS, the public hearing was commenced at 10:00 a.m.
on December 10, 1975, in the City Council Chambers, having
been moved from Room 707, with many persons persent, including
Messrs. Robert Schoenecker, Paul Schoenecker, Armand Schoenecker,
Ma.rk Wallraff, Bruce Weinard and Stanley Mosio; and
WHEREAS, the hearing continued from 10:00 a.m. to approxi-
mately 12:10 p.m. , and from 2:00 p.m. to 4: 15 p.m. , during
which period of time the members of the License Committee were
in attendance; with all other members of the Council in attendan�e
for all of the morning session and for most of the afternoon
session; and
� � �66�64
WHEREAS, applicants Wallraff and Weinard were repre-
sented by Stanley Mosio; and applicants Robert, Paul and
Armand Schoenecker were �oepresented by Paul Schoenecker; and all
indicated their readiness to proceed; and all were advised of
and afforded an opportunity to present evidence and witnesses,
and to cross-examine adverse witnesses; and
WHEREAS, the License Committee received testimony from
Joseph F. Carchedi, License Inspector; Gene A. Tonda, Hotel
and Restaurant Employees Local 17 ; Pierre N. Regnier, City
Attorney; John T. Finley, attorney at law; Paul Schoenecker;
Oscar Sundberg; Bruce R. Weinard; Robert A. Schoenecker; and
received into evidence without objection several letters and
documents relating to the transfer application; and neither
Ma.rk Wallraff nor Armand Schoenecker testified; and
WHEREAS,- the e�idence presented to the Committee referred
to or established the facts contained in the Committee Report
attached hereto and dated December 15, 1975; and
WHEREAS, on the basis of all of the evidence received
and on the basis of the demeanor, appearance and credibility
of the witnesses, after having heard summations of counsel
for the transferees and for the Committee, the License Committee
voted unanimously to deny the transfer application; and
WHEREAS, all members of the City Council having considered
the Committee report attached hereto, the evidence and docu-
ments received, and having considered the demeanor and credi-
bility of the witnesses ; and after having permitted the applicants
to file written objections to this Resolution and argue orally
before the Council; and
WHEREAS, a copy of this Resolution as reported from the
License Committee has been mailed to Messrs . Paul, Robert and
Armand Schoenecker, Stanley Mosio, attorney for Mark Wallraff
and Bruce Weinard, advising them that they ma.y file written
objections to this Resolution w�th the City Clerk and may
further appear before the Council to argue against its passage
on such date as the Council ma.y consider it; now, therefore,
be it
WHITE - CITV CLERK �yy/����
PINK - FINANCE COI1flC11 ��
CANqRV -DEPARTMENT GITY OF SAINT PALTL File NO. VU
� BLUE - MAYOR
a . : : - Council Resolution
Presented By
Referred To Committee: Date
Out of Committee By Date
RESOLVED, that the application of E.D.M. , Inc. ,
d�b/a The Crusader Lounge to transfer its On Sale
Liquor License to MWWB, Inc. , is hereby denied; and
be it
FURTHER RESOLVED, that a copy of this Resolution
and Committee Report be mailed to Messrs. Paul, Robert
and Armand Schoenecker, and Maxk Wallraff and Bruce
Weinard by the Clerk after its publication.
COUIVCILMEN Requested by Department of:
Yeas Nays
Christensen
�� Hunt �— In Favor
Rcedler A gains t BY
Sylvester
Tedesco
President � Hozza �
�C 3 Q Form Appro d by City A ney
Adopted by C . Date •
Cert' ' Pass b uncil Secretary . BY
By
Approve by Mayor: ate 9�J Approved by Mayor for Submission to Council
By By
Pt�tsHEQ ,�AN 4 � �976
• ������
LICENSE COMMITTEE REPORT AND FINDINGS
December 15, 1975
1. The affidavit filed and signed by Paul and Robert
Schoenecker as transferors pursuant to Sections 390.08(c)
and (e) of the Legislative Code, recites that they have "paid
all wages due and owing the persons employed" by them, and
further, that they as transferors have "satisfactorily and
completely complied with all contractual obligations" per-
taining to various employee health, welfare and benefit
programs. These recitals are false in that the transferors
did neither. Bruce R. Weinard, one of the transferees, did
enter into an agreement (to which the transferors were not a
party) with Local 17, Hotel and Restaurant Employees, to place
in escrow the sum of $2,000 for the purpose of paying wages
and benefits due and owing to former employees of the transferor.
There was no evidence as to the exact amount of back wages and
employee benefits due since there was testimony both that the
books of the transferor were stolen and not available, and that
the said books were locked up on the premises at 1201 Payne
Avenue and not available. Gene Tonda stated it was his belief
that $2,000 would be sufficient to cover all outstanding obli-
gations.
2. Joseph Carchedi testified that Robert Schoenecker, in
an interview in the License Inspector' s office on October 30,
1975 (at which Philip B. Byrne, Deputy City Attorney, was also
in attendance) , stated that there was an additional handwritten
agreement between the parties. This agreement was dated July
28, 1975, and was signed by Robert and Paul Schoenecker and by
Ma.rk Wallraff and Bruee Weinard. Carchedi testified that
Armand Schoenecker also stated there was such an agreement, and
that Mark Wallraff both admitted and denied the existence of
such an agreement. Carchedi testified that Paul Schoenecker and
Bruce Weinard denied the existence of such an agreement, and
that Weinard explained that Robert Schoenecker ma.y have been mis-
led by three yellow legal sheets of notes, f igures and doodles
he wrote down on July 28, 1975. Robert and Paul Schoenecker and
Bruce Weinard testified at the hearing that there was no hand-
written agreement.
. . � � ' �������
3. The parties signed a typed contract for the purchase
of the license an �ugust 24, 1975, in which the total con-
sideration to be paid by the buyers (transferees) was $1,750.
$875.00 had already been paid by Bruce Weinard on July 28,
1975, in a check to the City for the second-half installment
of the license fee, which payment was made without any express
agreement or understanding. In so doing, the sellers
(transferors) had not looked for any other buyer of the license,
and did not accept or seriously pursue a $20,000 offer from
George Montpetit. From the end of June, 1975, to the present
date, the outstanding debts and liabilities of the Schoeneckers
and E.D.M. , Inc. were �180,000-�190,000. Robert and Paul
Schoenecker in statements to Joseph Carchedi said they in-
tended to file personal and corporate bankruptcy as soon as
the license was transferred (Paul Schoenecker in two separate
conversations with Pierre Regnier ma.de the same statements. )
Robert and Paul Schoenecker in statements to Joseph Carchedi
(and Paui Schoenecker to Pierre Regnier) , also stated that the
reason they were selling the license for such a low price is
that first, they would not receive any of the proceeds whatever
the amount, since the creditors in bankruptcy court would split
up the entize amount; second, their animosity toward a prin�ipal
creditor, a Mr. Oscar Sundberg, the landlord of E.D.M. , Inc. ,
who had closed them down, was so great that they wanted to keep
the expressed sale price down so that Sundberg would get as
little as possible from his share in the bankruptcy proceedings•
and third, in no way did the sellers (transferors, Schoeneckers�
wish to permit Sundberg to buy the license in the future,
although they admit they took no steps to require the buyers
(Wallraff, Weinard) to enter into agreement of that kind.
Bruce Weinard knew before and at the time of the agreement
of August 24, 1975, both that the sellers had no choice but to
go into bankruptcy and that they had discussed going into bank-
ruptcy. He and Ma.rk Wallraff advised Carchedi in an interview
on October 23, 1975, that they never really talked price be�ause
all the parties knew whatever was received would go into the
assets disbursed by the bankruptcy court. Weinard and Wallraff
kn�w of the offer of $20,000 for the license by George Montpetit,
and also knew of the hostility of the Schoeneckers for Oscar
Sundberg, landlord and creditor.
2.
. . , �.
,
. .,
� � � �ss�s�
Weinard testified he would have to make additional expendi-
tuP�es to get the business underway such as lease payments,
purchase of fixtures and inventory, and has paid or promised
to pay off the back wages and the attorney fees of D. Patrick
McCullough. Some of these or similar expenditures would have
to be made even were the license to be sold at the fair ma.rket
value of $32,000-$35,000.
The License Inspector testified that in five recent trans-
fers of on-sale licenses, the sale price of the license itself
(aetually, the price of the consent by the licensee to transfer)
was $35,000, $35,000, $32,000, $32,000, and $35,000. In addition,
an offer of $35,000 was ma.de and turned down for one currently
inactive license; and the holder of another inactive license
values it at $30,000. The details are contained in letters and
a document received in evidence by the Committee without objection.
Robert Schoenecker advised Mr. Carchedi that he had been
promised a job by the transferees after the license transfer was
approved.
Title 18, Section 152 of the United States Code, provides
in part:
". . .Whoever, either individually or as an agent
or officer of any person or corporation, in con-
templation of a bankruptcy proceeding . . . knowingly
and fraudulently transfers . . . any of his property
or the property of such other person or corporation
. . . shall be fined not more than $5,000 or im-
prisoned not more than five years, or both."
'T�tle 11, Section 107�d)(1)-(3) , defines a fraudulent transfer,
inter alia, in a number of ways, including transfers in which
the amount paid for the property transferred is disproportionately
small as compared with the value of the property obtained; and
Title 11, Section 110 of the United States Code, defines property
in a way to include cash proceeds of the sale of a liquor license.
3.
� � , o �
. o ,_ ����
.
' � CITY OF SAINT PAUL
DEPARTMENT OF FINANCE AND MANAGEMENT SERVICES
DIVISION OF LICENSE AND PERMIT ADMINISTRATION
iti�ovember 13, 1975
i:r. j:resident and rionora�le ==enbers
of the Cyt�; Counc_l .
Saint Paul, ilinnesota
, I-�r. Pres;dEnt and ror�ora:-�le �.emk:ers :'
i;.L.il.� iT1C. �01ri� business ?.S t!"'ie CT"U�ader JLOU.P_�;2�
and i',.''�:;.':.'.���., Inc. �aT.e a��plicut�on for t:,,e �ra.r_sY'er of Cn �ale
Li�uor Ia.cense ?:o. 875l�, e�nirin; Janua,ry 31, 197b, issued to
�.?.���., Inc. at 12�I. t'z�.me yvenue to i:.�::.'::.�., Irc. at �tze s���e
address.
J-
f i-i.�;.';i.��., Inc. also ma?�es a_r,plicatior_ ior the tr�:sfer
ef �unda� On Sale iiquor Licen::e i�lo. 93��, e<Nirin� Janu�;ry 31, 197b
' and new Cla.ss C2-�,.es�au^ant, iavern and Cig�rette licenses at the
'' s a*ne aac:res s.
; The off�cers o�' i!.�;.:s.��., Inc. are I�ar�; :�. ::all^�f, hold.ing
the offices of 'lice rresiderlt ar�d Secretu.T�� `�u..r1Q ::lruce l�. �:eir�ard, r�old-
ing tiie off;ces of Pres�dent ar_d lreasurer.
xccording to tne papers subm�.ttec, ro stock ;�as been issu�d
yet.
�ttacned a.re tl�e coni�s of thezr a-:���licat_ons a:_d supporting
papers.
j%er��- truly �Tou.rs,
�
Joseph l�. C���c�edi
License Insp ector
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