For many folks in Houston, the sudden closure of Foreign Correspondents honestly came as a surprise. The restaurant earned good reviews, had a stable of neighborhood regulars, and even scored a little national attention. But apparently none of that was enough to overcome the incredible drama going on behind the scenes at Treadsack Restaurants, the group that owns Foreign Correspondents, Hunky Dory, and Bernadine’s.
In a lengthy, unsolicited statement provided to Eater, Treadsack owner Chris Cusack details the personal drama, financial problems, and fraud that he says have all but crippled the restaurant group over the past year. “I see the biggest culprit as over-optimism,” wrote Cusack. “We had quick success with our first several ventures, Down House and D&T Drive Inn, and from them bought a team of investors interested in several large projects.” Bernadine’s and Hunky Dory came soon after.
But despite those exciting openings — and the accolades that followed — trouble was brewing behind the scenes. In October 2015, the company realized that its bookkeeper had not only failed to pay the company’s outstanding obligations, but had also allegedly embezzled funds from the organization for more than a year. “She had carefully covered her tracks and hidden expenses deep in the thousands of checks issued annually,” said Cusack. “But after extensive use of an outside accounting firm we now have charges filed with the police and the district attorney’s office.”
As a result of the bookkeeper’s alleged failure to pay Treadsack’s bills, the IRS came calling. The company says that it was forced to enter into an agreement to pay off an outstanding tax lien, and in the meantime, was hemorrhaging money as it paid salaries to chefs and other restaurant employees to staff the forthcoming restaurants. Cusack says that the company soon fell behind on vendor bills and payroll, and bounced its first payroll check in “late 2015.”
In order to try to save the company, Cusack says that Treadsack has borrowed “several hundred thousand additional dollars” from its friends and investors, along with personal investments totaling “tens of thousands of dollars” from partners Benjy Mason and Joey Treadway.
The saga continued with the closure of Foreign Correspondents. Starting early last fall, the restaurant was losing “tens of thousands” of dollars each month, and sales slipped. The chef quit unexpectedly in the middle of service, and told Cusack that he was taking the recipes with them. With “zero dollars in the bank,” Cusack says that he and his business partners paid the restaurant’s employees from their own pockets.
Considering all the drama that allegedly went down inside the Treadsack organization, the company’s founders say that have seen their own share of personal drama, including losing their health insurance, having their bank accounts frozen by “the state,” and failing to repay their investors. “The stress of all this as has caused the end of my marriage, strained my friendships, and caused countless nights of lost sleep and anxiety,” writes Cusack. “I live with the fact that this is 100% my fault.”
In addition to all of this insanity involving Treadsack, Cusack also cites the downturn in Houston’s economy as a contributing factor, and specifically cites a recent Thrillist article exploring the looming restaurant “bubble” that cities across the country are currently facing as part of the problem. Even considering that, though, the best restaurant in the world probably couldn’t survive losing hundreds of thousands of dollars, embezzlement, tax liens, and everything else that has befallen Treadsack in the past year.
Eater has reached out to Cusack for more information on the closure of Foreign Correspondents, the alleged embezzlement, and whether or not this chaos will impact the group’s other concepts.
UPDATE: In addition to Cusack’s statement, the Houston Press has published details from “internal memos” provided to the paper that allege further financial misdeeds, including partner Joey Treadway putting his mother-in-law, wife, and sister on the Treadsack payroll, Chris Cusack telling employees to skip tax payments, and worse, hundreds of employees seeing their paychecks bounce on a regular basis.
Check out this excerpt from the Press’s report:
Based on internal memos obtained by the Press, the expansion appears to have caused delays in paying state and federal taxes — as well as bonds — leading to frozen accounts, and employees' dealing with bounced paychecks and cancelled health care benefits. One source familiar with the financials told the Press that, on a weekly basis, up to half of the company's 400-500 employees either couldn't cash their checks or have funds immediately available if the checks were deposited. Some employees' accounts allegedly went into the red because of excessive insufficient funds fees; others had to change banks altogether.
UPDATE #2: Chris Cusack responded to Eater’s request for additional comment — sort of. Cusack declined to name the bookkeeper who allegedly stole funds from the restaurant, citing an ongoing investigation. He also refused to comment on whether or not Treadsack had settled its sales tax debts with the Texas Comptroller of Public Accounts.
Cusack did, however, say that the closure of Foreign Correspondents and the company’s financial struggles will not impact Treadsack’s other concepts. “Closing Foreign Correspondents was a decision that helped ensure the future success of our other restaurants,” he says.