Peak City Grill & Bar in downtown Apex abruptly closed Wednesday after a court order detailed chronic financial mismanagement.
Peak Hospitality Group, which owns the restaurant, filed for chapter 11 bankruptcy protection in August and sought in May to have its case dismissed, according to court records. Owners argued they couldn’t repay the debt, in excess of $450,000, within the required five years, according to court records.
Instead, a judge in the Eastern District of North Carolina Bankruptcy court kicked the case out of chapter 11 and into chapter 7 proceedings, according to records filed June 12. That takes the case out of owner Steven Adams’ hands and appoints a trustee to settle tax debts and creditors with the sale of any assets.
Under chapter 11, the restaurant remained open, but under chapter 7, Peak City is closed and its assets will be liquidated.
The court order alleges Adams moved money hundreds of times between business and personal accounts in the months after the restaurant filed for bankruptcy. Those transfers were prohibited by the court, according to the order, which said Adams took a $2,000 per week salary, exceeding a pre-determined amount set in the bankruptcy proceedings.
“Mr. Adams has created an accounting conundrum with the hundreds of transfers that now must be sorted out by a forensic accountant to determine exactly how much he has been overpaid in contravention of the court’s orders, and whether the state and federal taxing authorities have yet again been underpaid while Peak was under bankruptcy protection,” the order reads.
“As a result of Mr. Adams’ financial acrobatics, Peak is in violation of the officer wage order and cash collateral operating orders and has filed inaccurate monthly financial reports in the case to boot,” the order reads.
According to the order, Adams acknowledged the numerous transfers but said the payroll checks weren’t cashed while other transfers were to “represent replacement of the payroll checks with cash withdrawals and bank account transfers.
In August, Peak Hospitality Group claimed nearly $1 million in debts and $33,000 in assets, according to bankruptcy filings. The restaurant brought in $1.3 million last year, down from $2.1 million in sales the prior year, according to bankruptcy filings.
Within Peak’s debts, payroll taxes represent the vast majority, with more than $760,000 owed to the IRS. Nearly $200,000 more is owed in bank loans.