Bar Fight

Two troubled businesses, one big financial mess

A bar has operated continuously at 901 Cedar Avenue South, in the West Bank neighborhood of Minneapolis, since at least the 1930s. Following Prohibition, the joint was initially known as the Golden Leaf. In 1984 Gary Mackenzie purchased the bar and renamed it Whiskey Junction. Over the next two decades, it established a reputation as a popular biker watering hole and live blues venue.

At the beginning of 2005, Mackenzie sold Whiskey Junction to local attorney Cami Freeman-Waag and her husband, Roal Waag. On the surface the place hasn't changed much in the intervening 18 months. It still features live music six nights a week and attracts a clientele with a fondness for facial hair, Harleys, and leather.

But beneath this facade of normalcy, the once-flourishing bar has hit hard times. Whiskey Junction is mired in debt, in arrears on its property taxes, and struggling to pay employees. Compounding matters is the demise of Lucky's Garage, a West Bank motorcycle shop also owned by the Waags that went belly-up last month owing to financial difficulties.

At the heart of the troubles, though, is a bitter personal and financial dispute between the Waags and Tom O'Shea, the boyfriend of former Whiskey Junction manager Elizabeth "Little" Obregon. On January 6 of this year, O'Shea signed a contract to purchase Whiskey Junction. Freeman-Waag says that her motivation for selling the business was twofold. Last fall she suffered a breast cancer relapse and had to undergo radiation treatment. "I'm a breast cancer survivor for five years now," she says. "I can't ever seem to kick it." Second, the smoking ban, which went into effect in March 2005, had significantly cut into revenues.

O'Shea paid $250,000 up-front to acquire the business and also agreed to take over mortgage payments on the property. The deal was contingent, however, on O'Shea acquiring a liquor license.

In the meantime, as the new owners attempted to clear that bureaucratic hurdle, it was agreed that O'Shea and Obregon would take over the day-to-day operations of the bar starting immediately. The couple says that they set about making long-needed changes to the business—improving the quality of the pizza and repairing the building. "I really saw some huge changes," says O'Shea. "It seemed like the place was going to get back on track."

Freeman-Waag paints a very different picture. She says that revenue plummeted as soon as the new management team took over. "The reports that they had given me for the first quarter showed us doing half of what we did the previous year," she says. In a series of e-mails between the two parties in late March, Freeman-Waag claimed that the business was $100,000 in the red for the first quarter of 2006. "BASED ON WHAT YOU GUYS GAVE ME FOR CURRENT NUMBERS IT IS TANKING!!!!!!!!!!!" she wrote frantically to O'Shea on March 31. "Is there other income that is not being entered on the books???? I don't ask this accusingly, it would actually make me feel better about whatever has happened there to know that we are actually not loosing [sic] so much money so fast."

In early April, the Waags re-took control of business operations and have been running it since then. The two parties are no longer talking—except through court filings. At the beginning of May, Freeman-Waag served a lawsuit on O'Shea and Obregon. It claims that the couple violated the purchase agreement, embezzled funds from the bar, and defamed her character. For instance, the complaint alleges that O'Shea and Obregon wrongly appropriated $23,400 in bar cover charges. The lawsuit is seeking $250,000 in damages.

O'Shea and Obregon tell a very different story about what transpired after the purchase agreement was signed. O'Shea says he insisted that Freeman-Waag take care of the bar's numerous debts before he would agree to the deal. Freeman-Waag complied by mailing out numerous checks to creditors. But after the deal was signed, those checks began bouncing because of insufficient funds. "I told Little, 'She pulled one over on me,'" O'Shea recalls. "All the checks she wrote that satisfied our suspicions started coming back."

Last month O'Shea and Obregon filed a counterclaim in Hennepin County District Court. They allege that the Waags violated the purchase agreement by failing to hand over the bar as outlined in the contract. They are seeking monetary damages in excess of $50,000 and an order mandating that the property be foreclosed on and sold at auction. "I think it was a race to the courthouse to see who could file first," says O'Shea.

In the meantime, the bar's economic woes have continued. According to Hennepin County property records, roughly $15,000 in taxes is owed on the property. In January, Sysco Food Services of Minnesota sued the bar and Freeman-Waag for nearly $30,000 in unpaid bills. A judgment was issued in March against the defendants. Paul Marso, the attorney representing Sysco, says that so far only about $3,000 of the bill has been covered. "They keep threatening to make payments," he says. "They've made a few." At one point Hennepin County Sheriff's deputies entered the bar and attempted to procure money directly from the cash register on behalf of Sysco. But they left, according to court records, after being told that the business had been sold to O'Shea.

The difficulties at Whiskey Junction have been further exacerbated by the financial turmoil of the Waags' other business, Lucky's Garage. Last month Hennepin County District Court Judge Heidi Schellhas issued an order granting Associated Bank "immediate possession of all assets" controlled by Lucky's Garage, and placed the business in receivership. The reason: The motorcycle shop had failed to make payments on a $600,000 loan taken out last August. This effectively shut the business down.

The list of other individuals and businesses that claim Lucky's Garage still owes them money is lengthy. Larry Lautenbach filed a lawsuit last month in Hennepin County District Court against the motorcycle shop and Roal Waag for breach of contract. He alleges in the suit that the store took his 2003 Borget motorcycle on consignment and sold it for $22,500. However, he claims that a pair of $10,000 checks given to him in February by the store both bounced. Subsequent attempts to collect the money owed him have been unsuccessful.

A pair of search warrants executed last month by the Minnesota Financial Crimes Task Force describe similar treatment of two other Lucky's customers. On June 7, according to the warrants, Minneapolis resident Trenton Fields filed a police report stating that he'd turned over his 2000 Harley Davidson Electric Glide Classic to Lucky's on consignment and that Freeman-Waag had given him a check for $11,000. The check, however, bounced. Then on June 13, Maple Grove resident Peter Daszkiewicz reported to the Minneapolis Police Department that he'd sold his 2000 Harley for $13,000 through Lucky's Garage. Repeated attempts to collect the money proved futile. Finally, KSTP-TV (Channel 5) reported last month that Karl Stocker, a member of the Minnesota National Guard, allegedly paid Lucky's $3,750 for motorcycle repair work that was never performed.

There are outstanding business debts as well. Merx City, a company that produces promotional products, has sued Lucky's Garage and the Waags in Hennepin County District Court. The company is seeking just over $4,000 in unpaid bills. "They just sort of stopped cooperating with us in any form whatsoever," says Joseph Capistrant, the attorney representing Merx City. "We've tried to garnish bank accounts and it came back with them saying there were no funds available to garnish." In addition, according to Hennepin County property records, roughly $32,000 in property taxes is owed on 815 Cedar Avenue South, the site of Lucky's Garage.

Freeman-Waag says that as of last week, the motorcycle shop had been sold to new owners. She insists that all outstanding debts will be paid in the near future. "Everyone's going to get paid," she says. "Even if we have to wash dishes until I'm 84."

Freeman-Waag says that she still hopes to return Whiskey Junction to its heyday as a biker hangout and live blues venue. "I've just been working day and night, day and night, day and night, to get everybody paid and to keep this bar open," she says. "I'm so exhausted and frustrated and angry about what happened. I'm just a woman busting her ass trying to raise three kids and keep this bar open."

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