Wednesday, August 23, 2017

Mugshots Ridgeland owner accuses co-owner of fraud.

An owner of Mugshots Ridgeland asked a federal judge to divorce his partner from the restaurant. William Walker sued fellow Mugshots Ridgeland owner Chris McDonald and several McDonald companies in U.S. District Court on April 13, 2017.  The complaint charges McDonald with defrauding the restaurant and the plaintiff.  Mr. Walker also asked the court to declare him the sole owner of the Mugshots Ridgeland franchise and terminate his partner's rights under the operating agreement.

The two men opened Mugshots Ridgeland on October 20, 2015.  However, Mugshots Ridgeland, LLC was formed in  early 2014.  The incorporation documents submitted to the Secretary of State only state that Mr. McDonald is the owner.  Mr. Walker does not appear on any documents filed with the Secretary of State until 2016 in the annual report for the LLC.  The operating agreement was filed under seal with the court.  The lawsuit charges the defendants with racketeering (RICO), tortious breach of contract, and unjust enrichment. 

Mr. Walker accused Mr. McDonald of borrowing $50,225 against the business from Citizens Bank of Philadelphia without his knowledge, much less his consent.  The loan was a "revolving line of credit."  Mr. McDonald didn't tell the bank that he had a partner as well.   However, the borrowing didn't end with one loan.  Mr. McDonald apparently had borrowed against his Mugshots in Montgomery.  He refinanced and consolidated the two loans into one loan for $98,704 that used Mugshots Ridgeland as the sole collateral.   The two men apparently owned another Mugshots in Covington, Louisiana.  Mr. Walker accused his partner of using that franchise to yet again fraudulently obtain another loan. However, the lawsuit claims the shenanigans didn't stop with just borrowing money.

Mugshots Ridgeland fell behind on paying taxes and royalties to its parent company that just happened to be owned by Chris McDonald.   Money was spent on advertising.   Mr. Walker claims that his partner spent money for "advertising" with a company Mr. McDonald owned without any record of such advertising.

The defendants weren't served with the lawsuit until earlier this month.  They have yet to respond to the complaint. Don't forget the rent.   The landlord didn't charge rent to Mugshots Ridgeland for the first three months after it opened.  Mr. McDonald owned a company that subleased the property to Mugshots Ridgeland.  The complaint charges that Mr. McDonald paid $30,000 in rent to his company even though the landlord didn't charge rent and Mugshots was supposed to pay the rent directly to the landlord.

The complaint was not served upon the defendants until earlier this month.  They have yet to respond to the lawsuit.  The case is assigned to U.S. District Judge David Bramlette and Magistrate Linda Anderson.


Anonymous said...

Cheeseburger in paradise!

Anonymous said...

These guys go back long before 2015. McDonald is one of the founders, and I'm pretty sure Walker has been with them for awhile; especially considering one of the burgers is named after him. Sounds like the classic case of handshake agreements between former friends.

Anonymous said...

Many years ago we were involved in an LLC. The managing partner took $150,000. and spent it personally and promptly died. Evidentally, at least in our case, there is no recourse for the others who just invest in the LLC. It was an LLC that developed land and the road on the east side of I55 running north of 463. The taxpayers of Madison County are left paying the bill without even being able to know who was part of the LLC. Somehow these legal entities are able to truly get away and leave others paying.

Anonymous said...

LLCs are an unknown item for the most part.

How they work is a mystery to most.

i always make someone sign a personal guaranty.

It may be eventually be worthless but at least I'll see the obligor on Court street and know it's over and why if things go south.

Anonymous said...

My only experience with an LLC was a colossal failure. I let friends convince me to invest in a record store/beer bar called Musiquarium in the late 90s. It was located in Banner Hall. It went broke within a year.

Atty said...

Fought v. Morris (543 So. 2d 167 [1989]) gives an insight into some of these matters. This is a Mississippi Supreme Court case easily located on Yahoo.

Anonymous said...

12(b)(1). Federal court has no jurisdiction. This [particular complaint] will go away.

Anonymous said...

uh oh....

looks like one of the plaintiffs doesn't exist

Name Name Type
W. Walker Investments, LLC Legal
Business Information
Business Type: Limited Liability Company
Business ID: 993996
Status: Dissolved
Effective Date: 01/06/2012
State of Incorporation: Mississippi

Anonymous said...

oh I remember that place. As I recall, it only served beer as it did not have a liquor license. The main reason it died is that most women going to a bar want a cocktail or a glass of wine and not a pint of beer. Drug crowd didn't help either.

Jobie said...

11:14 - Did you have your CPA review the projections and business plan? If not, that was your big mistake and you are the one to blame. At least you were not personally liable for the unpaid debts as you may have been in a general partnership.

Anonymous said...

I wonder if McDonald is the reason some of the other mugshots(founder)'s stores split?

Anonymous said...

Musiquarium was a great place. Probably a little ahead of its time now with craft beer the norm.

Anonymous said...

Musiquarium was fantastic, and open far longer than a year.

The fact that it opened precisely when Napster gutted the recording industry had a greater impact on the MQ, as it was initially a record store serving beer rather than a bar selling records.

Anyway. Sorry you lost your investment. But it was a great place.

Anonymous said...

Stop the day drinking @kingfish. Gets your threads straight and try again ;)

Anonymous said...

More cutting edge news brought to you by KF.

Anonymous said...

The original two owners of Mugshots were Chris McDonald and Ron Savell. I know Ron personally and remember a little bit when they split in 2007/2008ish. I think Chris wanted to take what the original Mugshots in Hattiesburg was and stamp it across the south. Ron wanted didn't necessarily care for the growth/franchising as much, and saw the better money with more of a family-friendly restaurant part of the business as opposed to a college bar. Ron just was also more conservative and safer, having just started a family around that time - and really just wanted to be local. The two split up, with Ron taking a few locations and Chris taking the others, with Chris trying to grow the business. There may have been some bad blood between the two in that split, but I can't recall.

Anonymous said...

"oh I remember that place. As I recall, it only served beer as it did not have a liquor license. The main reason it died is...."

Goob; The place just opened last year.

Anonymous said...


Why don't you explain when partners at an LLC can sue each other?

Can they? How? Who / what is wronged when one member steals?

Who reps the entity? They are all members.

You better study well past1989 or you will be sad.

And quit being a snarky Dick.

Anonymous said...

Just had a m/shots open in Columbus, Ms, have not been there but hope they do well.

Anonymous said...

5:59, keep up. They were talking about Musiquariam - which was open a long time ago, not last year. You can't play the ponies if you don't have a program - next time, check the log before you put your bet down.

Anonymous said...

If no operating agreement u go by the llc statutes, I think. U don't have to actually register with the secretary of state either to be an llc. Lots do, but not required. Lots of folks that own rental houses do it without registering the name with the state.

Anonymous said...

If one wants protection by using a LLC structure a comprehensive 'operating agreement' must be in place stating who has authority to bind the LLC. When I prepare LLC operating agreements, I always ask what is the money limit that one member without the signature(s) of all the members is required. When a bank or other lender makes a loan to a LLC they want to see the agreement. I don't recommend that one member can bind the LLC. You are just asking for trouble. I recently saw a situation where there was no limitation as to the amount that a member could authorize and it caused the company to fold. A business doesn't get the liability protection of a LLC or Corporation if it is not registered with the SOS and pay the $50.00 fee and have all the paperwork to back up the operation. Just calling yourself a LLC or Corp does not work like the old common law marriage before the 1950's in Mississippi.

Del said...

10:32 - nope,

MS Code 79-29-201:[Effective from and after January 1, 2013, this section will read:]
(1) In order to form a limited liability company, a certificate of formation must be signed and delivered to the Office of the Secretary of State. The certificate must set forth:
(a) The name of the limited liability company;
(b) The information required by Section 79-35-5(a); and
(c) If the limited liability company is to have a specific date of dissolution, the latest date upon which the limited liability company is to dissolve.
(2) The certificate of formation may set forth any other matters the members determine to include therein.
(3) A limited liability company is formed at the date and time of the filing of the certificate of formation by the Secretary of State, as evidenced by such means as the Secretary of State may use for the purpose of recording the date and time of filing, or at any later date or time specified in the certificate of formation if, in either case, the certificate of formation so filed substantially complies with the requirements of this chapter. A delayed effective date specified in a certificate of formation may not be later than the ninetieth day after the date and time it is filed by the Secretary of State.
(4) For all purposes, a copy of the certificate of formation duly certified by the Secretary of State is conclusive evidence of the formation of a limited liability company and prima facie evidence of its existence.

Anonymous said...

10:32 - didn't you see Kingfish's post about the Hinds County supervisors and the emergency radio contract? Since there was no filing with the SOS, thus no legal entity was present in the suit, and Lackey dismissed the case.

Anonymous said...

Judge Lackey will be reversed.

Hawsmann said...

An "LLC" formed without following state LLC statutes would most likely fall under the General Partnership provisions of state law.

Anonymous said...

@9:17 - yep, and that makes you personally liable for all partnership obligations. Planning and proper documentation are critical.

Anonymous said...

I know a developer that has had multiple LLCs in his lifetime and he has stolen from each one---got caught several times and in some cases paid the money back by giving up his interest in the project. I know one case where he stole $750,000 (got caught) and another where he lost $500,000 of his partners money---He sits every Sunday in First Prez. There is another one in the choir that stole $105,000.

A LLC can be extremely dangerous for everyone except the managing partner. Was the thief on the right side or the left ????

Jinglehorse said...

His fellow LLC members apparently did not insist on any safeguards or keep up with what was going on each month. They would have had a right to inspect any and all LLC documents at any reasonable time. Sounds like they brought it on themselves.

Anonymous said...

For a place called Mugshots, the Ridgeland one had lame beers. No pale ale the last 2 times I went. I'm sure this is directly relevant to the post!

Anonymous said...

Well..... let's see...considering I went to college with both of the founders of Mugshots and a I am a former roommate of Ron, and have been around Mr. Mcdonald on many occasions I can personally attest to the character of both Gentlemen. Having said that, I'm not shocked nor surprised of the allegations against Mr. McDonald and having a lot of knowledge about this business from the day they open the doors I can see how this came about. Since the split of the 2 initial founders of Mugshots it seems pretty obvious to me who has the better business sense. Rons' restaurants have flourished and he has built a very successful business and a wonderful life for his family. While on the other hand Mr. McDonald's side has been nothing short of turmoil since then. So..... u guys form your own opinions about who is right or wrong in this current law suit. I feel bad for Mr. Walker.. Good luck sir.

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