Midwest Hotels charged with operating without a license

Shawano Leader/October 1, 2005
By Tim Ryan

In a case that sheds new light on a lawsuit lodged against the city, Midwest Hotels and Motels of Shawano, LLC, has been accused of operating the Best Western Village Haus without the necessary permits during the first several weeks that it allegedly owned the hotel.

A criminal complaint filed in Shawano County Circuit Court on Tuesday names Kalmar G. Gronvall, as an agent for Midwest Hotels, as the defendant. It includes three counts against Gronvall as party to the crime of selling alcohol, operating a motel, and operating a restaurant without permits.

Gronvall has been summoned to appear in Shawano County Circuit Court to answer the charges on Nov. 14 at 1:30 p.m. The maximum possible penalty on the three counts in the complaint would be nine months imprisonment and $12,000 in fines.

Midwest Hotels – a subsidiary of the Samanta Roy Institute of Science and Technology – has maintained it did not take ownership of the property until late May.

However, suspicions that the business had already been sold and was operated by new owners in April led to an investigation by the state Department of Revenue.

According to a case report filed by special agent Rick Uhlig and included in the criminal complaint, Uhlig received information on May 26 from the Shawano Police Department and the Shawano County District Attorney’s office regarding possible retail alcohol violations at the Best Western, 201 N. Airport Drive.

"Information received indicated that it was suspected that the business had been sold and was being operated by new ownership starting as early as April 15, 2005, but application for retail alcohol licenses had not been made until May 3, 2005 and the licenses were not granted until May 25, 2005," Uhlig wrote in his report.

Uhlig noted in the report that granting of the licenses by the city was delayed because of outstanding city taxes due and incomplete application forms.

SIST and Midwest Hotels filed a lawsuit July 29 against the city of Shawano regarding the handling of those licenses. The suit maintains that the city violated equal protection laws and interfered with property rights and business operations at the Best Western.

The suit is asking for damages in excess of $75,000, attorney fees and court costs, and a declaration that the city’s liquor licensing ordinance is unconstitutional.

According to the lawsuit, "in order to comply with the city’s liquor licensing requirements, the closing date of the sale was extended (sic) from April 15, 2005 to May 25, 2005."

At a May 24 Common Council meeting, the city held up issuance of licenses to the Best Western, partly because of confusion over the sale date.

The city asked to see a closing statement, as well as a land contract, warranty deed or title to the property before those licenses could be issued.

A land contract between Midwest Hotels and American Securities, Inc. was dated April 15, signed by Naomi Isaacson, CEO and chief manager of Midwest Hotels, and Frank Feivor, president of American Securities, Inc.

The contract called for the first payment on the property to be made on April 16, which was identified in the document as the closing date.

However, a settlement statement dated May 25 – a day after the Common Council meeting – identifies May 25 as the closing date and calls for a first scheduled payment to begin under the land contract on June 15.

That document is signed by Rebekah Brown, an attorney for Midwest Hotels, and by Feivor.

According to the May 25 document, "the parties agree that Buyer shall pay all expenses and taxes associated with the premises from and after April 16, 2005, the date originally intended for closing."

Uhlig’s investigation found that Feivor paid city room taxes for the Best Western through April 15, 2005.

Also, Uhlig noted in his report, the Department of Revenue received registration documents indicating that SIST, doing business as Midwest Hotels and Motels, "wished to register the business as being operated under their tax registrations with a start date of 4/15/05."

The document was completed and signed by Brown, Uhlig noted.

In August, Brown presented Uhlig with another document – a copy of a "purchase addendum" to the land contract between American Securities and Midwest Hotels that appeared to contradict the earlier settlement statement.

"The document indicated (that) all revenues were paid into and all supplies and expenses paid through the seller’s account through May 10, 2005," Uhlig wrote.

The document, which was not included in the criminal complaint, was signed only by Midwest Hotels and not by the seller, Uhlig wrote.

Uhlig interviewed Feivor regarding the document and was told it was the first time he had seen it.

"Mr. Feivor examined the document and said he had never seen it before, had not signed it, and would not sign it because it was not accurate," Uhlig wrote.

"Mr. Feivor said the closing date had been delayed due to liquor licensing problems, but the buyers took over operations on April 16, 2005 and were responsible for all expenses after that date," according to Uhlig’s report. "Mr. Feivor added that any revenues on or after April 16, 2005 were the buyer’s and not his and were never deposited into his accounts."

Uhlig also interviewed Jennifer Young, an employee of the Best Western during the ownership transition period, according to the report.

"Ms. Young said that during mid April 2005 she came to work and was notified, via a written notice, that the business had been sold," Uhlig wrote.

A paycheck stub from the week of April 10-16 showed that Young was paid by American Securities, Inc. A stub from the week of April 17-23 showed that she was paid by LEW Management Co.

According to Uhlig’s report, LEW Management Co. is owned by Lydia Welch, who was hired by Midwest Hotels under contract to manage the Best Western starting on April 16. Welch also manages the American Motel, 1330 E. Green Bay St., which is owned by Midwest Hotels.

Lisa Lucht, an environmental health specialist with the state Department of Health and Family Services, Division of Public Health, made an inspection of the Best Western on April 26.

According to her statement in the criminal complaint, Lucht was contacted on April 26 by Steven Theyes, who "informed me they took over the Best Western in Shawano and needed to get permits."

Theyes is identified by SIST in a separate document filed with the state as the hotel’s operational manager.

Theyes was asked when the transfer took place, according to Lucht, and said he would have to ask about the exact date.

"I informed him they were operating without permits," Lucht wrote. "To that he asked if there was no grace period and I told him there was not."

During the inspection on April 26, according to Lucht’s account, Gronvall told Lucht that Midwest Hotels was not yet operating the facility and that the manager from AmericInn, Lydia Welch, had a management company that was also managing the Best Western.

Lucht wrote that she contacted Welch after the inspection and asked whether she had a management company.

"She told me she didn’t have a company and all she knew was (at the) last minute she was called over from her employer to the Best Western and asked to learn the management role there," Lucht wrote. "She informed me at that time American Securities Inc. was still the operator of the business."

The criminal complaint also includes a Shawano Police Department report from May 24.

In the evening of May 24, after the Common Council held up issuance of the liquor licenses, police went to the bar at the Best Western and advised Welch that the bar was to close by midnight and remain closed until the city issued valid licenses. The hotel complied with the order.

A Shawano Leader reporter left messages for Brown and Isaacson seeking comment on this story. Those calls were not returned.

The Leader called the Division of Public Health but the director of that office was not available Thursday or Friday.