Seated on a bar stool at The Fur Shop — his hip, downtown Tulsa nightspot — City Councilor Blake Ewing told citizens gathered around the stage why they should vote for the Vision Tulsa sales tax proposal.
The proposal would generate more than $880 million in revenue to pay for exciting new projects, Ewing told them, like an Olympic BMX bike park and a futuristic transit hub he was proposing. But, he said, voters should have a say in the process.
“It doesn’t do anyone any good if elected people come up with an idea and just throw it out there without anyone talking about it,” Ewing told the small group that turned out for his “dive bar town hall” meeting.
But while Ewing was asking Tulsans gathered at The Fur Shop to approve Vision Tulsa, his business hadn’t paid the state nearly $40,000 in sales and beverage taxes collected at the same bar during the two years before the meeting, records show.
Three other businesses in which Ewing had ownership — Legend’s Dance Hall, The Max Retropub and The Phoenix Cafe — also failed to pay the state more than $100,000 in sales and beverage taxes collected during the two years before that meeting, according to an analysis by The Frontier of Oklahoma Tax Commission records.
In an interview with The Frontier and our media partner, NewsOn6, late Thursday, Ewing said he trusted others to run his companies and often wasn’t aware that sales taxes weren’t being paid.
“Years went by in our company where I never personally opened a piece of mail.”
Ewing said he always knew the money would have to be paid, along with hefty penalties and interest. He provided a letter from the tax commission showing he still owes about $60,000 in taxes collected by three businesses.
“No one in the world is stupid enough to defraud the Tax Commission. It may be incompetent or something but it isn’t deceitful.”
Ewing’s business tax troubles made news this summer when the state closed The Phoenix, his popular Pearl District coffee shop and bar, in June due to its failure to pay sales taxes it owed. Ewing blamed the problem on a “clerical error” and quickly made arrangements with the state to pay off the debt.
The business reopened about an hour later. But that wasn’t the last of Ewing’s tax troubles. It also wasn’t the first.
A month later, three other businesses that Ewing owned, all in downtown Tulsa, were cited by the state for failure to pay a combined $80,000 in sales taxes. Ewing again attributed the situation to bookkeeping problems, saying a fire at one of the businesses, Joe Momma’s Pizza, sparked a “tumultuous” time for his company.
“Regrettable administrative lapses … resulted in our current predicament,” he said then in a statement to the media.
However, records show the tax problems were not isolated cases. Instead, they are part of a pattern in which Ewing borrowed heavily to open multiple businesses at the same time, clashed with investors seeking financial information and his businesses failed to pay state sales and beverage taxes already collected, an investigation by The Frontier and NewsOn6 has found.
The state has cited Ewing and his businesses for failure to pay state sales and beverage taxes in at least 19 separate tax liens filed since 2010. (Here’s a link to the most recent liens filed this year.)
The liens sought payment of about $168,000 in taxes already collected by five of Ewing’s businesses but not paid to the state as required by law. (A sixth business received a lien for workers compensation payments not made to the state earlier this year.)
Ewing also opened new businesses while other businesses still owed state taxes or were being sued over outstanding debts.
In a lawsuit filed late Thursday, investors in one of Ewing’s businesses, The Max Retropub, accuse Ewing of fraudulently transferring more than $300,000 out of the business to fund his other businesses. The suit was filed by attorney Mark Perkins, who ran for mayor of Tulsa as an independent candidate in 2009.
The suit accuses Ewing of “massive acts of malfeasance and misappropriation” by using funds generated by The Max to pay expenses at Joe Momma’s Pizza, The Fur Shop and The Phoenix through a company called The Engine Room LLC. Some payments to Joe Momma’s Pizza occurred after the restaurant was closed due to a fire last year, the suit alleges.
The allegation that Ewing transferred money from one business to another isn’t new. A former business partner in a failed downtown grocery store alleged in an earlier lawsuit that Ewing often shifted money between his businesses to stay afloat.
During the past two years, investors in Joe Momma’s repeatedly asked Ewing for financial accountability and questioned what happened to insurance proceeds after the fire last year, according to emails obtained by The Frontier.
Marshall Kelley, one of 13 investors in Joe Momma’s Pizza, told The Frontier that investors had difficulty obtaining year-end tax forms and other basic financial records on the restaurant or getting Ewing to agree to hold an investors’ meeting. Joe Momma’s closed more than a year ago after a fire in a heating and air unit and has never reopened. Equipment has since been cleared out of the restaurant.
“There have been ongoing and unanswered questions about bookkeeping and shareholder communication over the last two years and some real questions about our insurance settlement after the fire,” Kelley said.
Paula Ross, a spokeswoman for the OTC, said sales taxes are often referred to as “trust taxes” because “that’s not the business owner’s money to use.”
Customers who buy food, drinks or other goods and services pay sales taxes on each purchase that are collected by the business. Each month, businesses are required to submit a report to the state stating the amount of taxes collected during the previous month.
Once the state receives the taxes from the business, the OTC sends a portion of it back to the city where the business is located. The amount depends on each city’s sales tax rate, as approved by voters.
Sales taxes provide the vast majority of city services, including street repairs and emergency services.
“We are trusting businesses to keep that tax and to remit back to the state,” Ross said. “It’s not the same as saying, ‘I hate paying my taxes.’ It’s not like an income tax. This is not your business’ money.
Mayor Dewey Bartlett said Ewing and other councilors swear an oath to abide by state laws and city ordinances, the same laws citizens are expected to follow.
Mayor Dewey Bartlett said city councilors should follow the same laws and ordinances that they expect the public to follow. Failure to pay sales tax on time deprives the city of needed revenue to operate, he said. DYLAN GOFORTH/The Frontier
“That is our major source of revenue and we count on the businesses of Tulsa to abide by the law and to collect sales taxes appropriately and remit it appropriately, and we count on them to make certain that everybody does play by the same rules,” he said.
Ewing also has many defenders who say the city councilor — who has two young children and is involved in several groups and causes — may have taken on more than he could handle at once. But they credit his energy, creativity and vision with boosting business downtown.
(See related story: City councilor remains popular, controversial figure.)
An unlikely path
In less than a decade, Ewing went from operator of a failed south Tulsa pizza joint to celebrated downtown restaurateur and politician. His businesses ranged from tried-and-true concepts such as gourmet pizza and barbecue eateries to more experimental ventures, including an ‘80s themed bar with video games.
Customers flocked to the new venues, which won praise for their high-quality food, drinks and experience in a growing downtown district that city leaders badly wanted to succeed.
Running a collection of trendy bars and restaurants was an unlikely destination for Ewing. The son of a Methodist minister, Ewing moved with his family from Coweta to Tulsa at age 12.
After graduating from Hale High School, Ewing attended a conservative religious college in Siloam Springs, Ark., John Brown University. The school’s student handbook includes a daunting list of “forbidden” practices and thoughts, including “dishonesty, occult practices, sex outside of marriage, drunkenness, and theft.”
It’s unclear whether Ewing graduated from the university, but after “doing some traveling,” he returned to Tulsa and married his wife, Julie, according to his council biography.
Ewing borrowed $20,000 from family and friends to open his first restaurant in 2005, a pizza parlor in south Tulsa. That business failed but the setback did not deter Ewing, who tried again a few years later.
In 2008, He opened Joe Momma’s Pizza in one of the city’s hottest new business zones, the Blue Dome district. The restaurant quickly became known for its crave-worthy pizzas and an incendiary pie featured on the television eating challenge “Man vs. Food Nation.”
Along with Ewing’s early success, there were also signs of financial trouble.
The Oklahoma Tax Commission filed a lien against Joe Momma’s LLC for failure to pay sales taxes, interest and penalties totaling $41,362 in 2009 and 2010.
Ewing soon went on a borrowing spree that had an odd beginning.
He formed a non-profit corporation, Park Hill Inc., and listed himself as registered agent. The non-profit appeared to be related to the Park Hill Assembly of God Church, 304 N. Rosedale Ave.
The company was among at least 18 corporate entities Ewing formed between 2010 and 2016, some later suspended by the state for failure to comply with reporting requirements.
Records show the church property was deeded to Ewing and his wife in 2010. The couple put up the two-story stone building as collateral for a loan of up to $48,000.
A company formed by Ewing— Back Alley Blues & Barbecue— then borrowed $272,000 to buy property at 116 S. Elgin, with a down payment equal to what they received for the church property.
The following year, Ewing was elected to his first City Council term and continued efforts to expand his downtown business holdings. He formed Archer Market LLC, intending to operate a downtown grocery store.
Ewing mortgaged his home near 13th and Frisco along with two other properties and signed a promissory note for $500,000. He opened The Phoenix, a bar and coffeehouse at 1302 E. Sixth St., and Legends Dance Hall, a country-themed saloon at 514 E. Second St. Other businesses were also in the works.
Then trouble began to mount. Ewing and his businesses faced several notable issues in 2014:
- The Oklahoma Tax Commission filed notice that The Fur Shop, a bar he opened at 520 E. Third St., failed to pay about $24,000 in sales taxes it collected to the state.
- Archer Market sued Ewing, alleging he misappropriated $121,000 from a credit line intended to be used to open the downtown grocery store.
- White Flag, formerly Back Alley Blues and Barbecue, stopped serving food and became a “part-time performance venue.”
The following year wasn’t much better for Ewing’s business empire:
- Four men alleged in lawsuits they were beaten, choked and assaulted by bouncers in separate incidents at Legends. Two bouncers were charged with assault and battery in the beating of one of the men: former University of Arkansas basketball player Michael Sanchez. One bouncer received a deferred sentence while the second pled guilty and received a suspended sentence.
- The Tax Commission filed a warrant for unpaid taxes at and Legends ($28,092).
- A fire near the air conditioning unit at Joe Momma’s forced Ewing to close the restaurant, which he vowed to reopen. He described the fire as “not catastrophic” and said it did mostly smoke damage. “A silver lining to the fire is that the restaurant will have a slightly different look after it’s remodeled,” Ewing said. “This is why we pay insurance.”
‘Not your investors’ problem’
What happened before and after the fire at Joe Momma’s, however, was a matter of dispute between Ewing and his investors, according to emails obtained by The Frontier.
The business was originally financed with help from 13 investors, all but two from the Tulsa area, who contributed a combined $327,500. Relations between Ewing and at least some of the investors grew strained as they questioned where the money went.
“Blake, I think we’ve been more than patient, but what’s going on with Joe Momma’s accounting the last year or so?” one investor asked in a May 2014 email to Ewing.
The business was late issuing tax forms and investors “still haven’t seen a distribution check for 2013,” the investor’s email to Ewing states.
“Did the restaurant not make any money last year? From all appearances it’s packed most of the time and everyone still raves about the place and the food,” the investor wrote Ewing. “We realize you’ve got a lot of irons in the fire lately, but that’s your doing. It’s not your investors’ problem.”
Ewing sent a terse “reply all” response to the investor’s email.
“To passive aggressively notify the partners of his dissatisfaction with the timeline and call me into question in a public forum. Not really my style, but I suppose I can accommodate,” he wrote.
“Maybe we can all just tone it down a bit and handle this like grown-ups, yes?” Ewing replied.
Ewing’s email still failed to provide the financial reports his investors sought. His email blamed delays in issuing tax forms (reports usually due in March) and holding investor meetings on a snafu involving his payroll company.
Financial records provided to The Frontier show the popular pizza restaurant reported a gross profit of $1.2 million in 2013, but wound up with less than 2 percent net income.
After the fire in July, Ewing initially said he planned to reopen. However several months later, he said: “Most people don’t understand the magnitude of the fire we had. It was a total loss.”
In July, Ewing announced that Joe Momma’s and White Flag (formerly Back Alley Blues and Barbecue) had been sold. It’s unclear whether funds from Joe Momma’s are still in dispute.
In an email to The Fronter, an attorney for Ewing said the building was a total loss.
‘Everything … was true’
A theme that emerges in documents and interviews about Ewing’s business practices involves allegations that he is shifting money among them to make up for shortfalls.
A lawsuit over his role in the downtown grocery store alleges that Ewing began drawing on a $350,000 line of credit extended to Archer Market in 2013. Instead of using the money for costs associated with the grocery store, Ewing used the funds for his other businesses, the suit claims.
Ewing “misappropriated Archer’s funds to keep afloat several of his other business interests, including Phoenix, White Flag, the Fur Shop and Legends. … The original amount disputed was $121,805.86,” the suit alleges.
The suit claims Ewing agreed to repay $76,648 and paid about $20,000 of that amount by August 2014 but “has since refused further payment of his obligation.”
“Ewing strung along Investors with false promises of hiring and training employees, which was never accomplished because the equipment and facility had yet to be purchased or completed,” the suit states.
The suit was settled less than three months after it was filed.
Shawn Zenthoefer, who originally partnered with Ewing on the project, told The Frontier she could not comment in detail due to the settlement agreement.
“We were at one point asked to withdraw the lawsuit and say it was not true,” she said. “My public statement would be that everything in the lawsuit was true and we would not say otherwise.”
Tax troubles continue
Bars and restaurants collect sales and beverage taxes paid by customers and are supposed to remit the taxes the next month to the Oklahoma Tax Commission.
That means Ewing’s businesses collected the taxes and then kept the money before repaying the state months or even years later.
Between August 2010 and October, the Tax Commission has issued tax liens totalling $168,000 to Ewing and his businesses for unpaid sales and beverage taxes, an analysis by The Frontier shows.
When business owners fail to submit reports or don’t pay the taxes owed, the state may place a lien against the business. (A lien is a document filed with the county clerk’s office against the businesses’ property to protect the state’s financial interests. If the property is sold, the lien must be repaid.)
If business owners fail to submit a monthly sales tax report or pay the proper amount of taxes for two months out of the previous 24 months, they are labeled as “non-compliant” and the state will contact the business to work out a payment arrangement, Ross said.
Businesses on a payment plan that are late or fail to pay the required amount three times are at risk of being closed by the state. Ross said business owners frequently come up with money to pay part or all of the taxes owed when they learn the state “means business.”
“We really try to work with business owners because it’s bad for the community and the business owner and the state to close down a business. If they will keep current on a payout plan and also remit for the months that they are actually collecting, then we will work with them.”
Despite his business tax troubles, Ewing was touting his role in opening another new business in April: The Beehive Lounge at Admiral and Lewis.
“Thank you to everyone involved in helping to open our little neighborhood bar concept in Kendall Whittier,” he wrote on his Facebook page.
Just one day after Ewing was elected in June to a new term as city councilor, the state closed one of his businesses, The Phoenix Cafe, because it had failed to pay about $15,000 in sales taxes to the state. Ewing told the Tulsa World that the nonpayment of taxes was due to a clerical error from a former employee and that The Phoenix was the only one of his businesses affected.”
Ewing told the Tulsa World that the nonpayment of taxes was due to a clerical error from a former employee and that The Phoenix was the only one of his businesses affected.”
However, three other businesses Ewing owned had failed to remit the proper amount of sales and beverage taxes to the state around the same time.
Before the state filed warrants to collect those taxes, Ewing sold two businesses, Joe Momma’s and White Flag, to Healthy & Tasty Brands Corp., a local business owned by a former oil and gas executive.
A few weeks later, the state filed six tax warrants seeking payment of about $80,000 in taxes collected at The Max Retropub, The Fur Shop and Legends Dance Hall during various months for the past two years.
In a written statement to the media at the time, Ewing again blamed administrative issues.
“In the time since the devastating fire at Joe Momma’s, I’ve elected to sell my stake in many of my businesses to pursue other interests and spend more time with my family. … We’ve had some regrettable administrative issues resulting in some skipped payments.”
To collect the taxes, the state sent garnishments to Central Bank of Oklahoma seeking any funds held for the three businesses. The bank reported deposits of about $24,000, less than half the amount owed.
Despite Ewing’s statement attributing the issue to administrative snafus, the state has continued to name him in tax warrants.
In August, the Oklahoma Tax Commission issued tax warrants against Blue Ox LLC and The Fur Shop for more than $23,000 in unpaid sales and beverage taxes collected during June. (Blue Ox is the corporate name associated with Legends Dance Hall.)
This month, OTC filed tax liens against Ewing and three of his businesses: Legends, The Fur Shop and The Phoenix Cafe. The state is seeking payment of almost $43,000 in unpaid sales taxes collected during 2015 and 2016.
Bartlett said the records uncovered by The Frontier show a pattern involving a city official failing to pay his business taxes.
“I gave Councilor Ewing the benefit of the doubt when he explained the situation, that he had some bookkeeping errors with an employee and that it was going to be taken care of and he was saying that it was a big to do about nothing. Apparently there’s a little more to it than that. That is very very unfortunate.”
Ewing said he worked hard to make his businesses thrive and had no intention of avoiding his debts.
“Some of these happened because the business itself struggled and so trust me, sales tax wasn’t the only thing that didn’t get paid. … But if something is not paid on time, we get it paid. I figure out how to pay it.”
https://www.readfrontier.com/investigation/in-midst-of-personal-struggles-ewing-remains-a-popular-effective-and-controversial-city-councilor/
