Rovezzi Rings Dinner Bell For Taxman
Restaurateur owes state, feds $160K
Christopher J. Rovezzi, one of Central Massachusetts' best-known restaurateurs, owes the state nearly $80,000 in back meals and withholding taxes, and his property at 28 Maple St. in Sturbridge is the subject of three active state Department of Revenue liens seeking to recoup that amount.
Fast Cash
But Rovezzi claims he was the victim of a cash-advance scam put on by Chicago-based Rewards Network Inc. that sucked thousands of dollars intended for meals and withholding taxes from a company bank account. Rovezzi says he still owes Rewards Network $70,000.
"I was very naïve, and they were taking $5,000 to $6,000 a week out of my bank account," Rovezzi said. "They give you money up front," $50,000 in Rovezzi's case, "and then they take 200 percent back."
And the state tax collector isn't the only one staking a claim to Rovezzi's property as a result of the scam. The U.S. Internal Revenue Service has an active $80,137.64 lien covering unpaid income taxes from 2005, according to state land records.
The most expensive state tax lien is $39,486.02 and dates back to September 2006. It covers meals and withholding taxes unpaid by Rovezzi's Line Cooks Inc., which runs the Rutland restaurant. Rovezzi's Boyzzi Inc., which runs the Sturbridge restaurant, owes $24,353.21 in meals taxes dating back to December 2006. I Could Eat LLC, which runs the Worcester restaurant, owes $15,877.77 in meals taxes dating back to Jan. 2007.
Rovezzi estimated that each of his restaurants pay $80,000 in meals taxes each year.
Rovezzi was notified of the liens in late October, according to revenue department documents.
He knew the notice was coming.
"They (Rewards Network) were taking $5,000 to $6,000 a week, and that was my tax money," Rovezzi said. "In order to stay in business, I had to pay vendors, utilities, staff - everything except for taxes. In order to stay in business, I had to make that decision. ... at no time did I say, 'To hell with the government, I'm not paying taxes.'"
Shark On The Menu
Rewards Network makes cash advances to restaurants for frequent dining credits, and agrees to advertise for the restaurant. When a frequent dining member eats at the restaurant, he gets a discount. The restaurant keeps 30 percent of the bill, plus the initial money it received from Rewards Network.
A group of California restaurants filed a class action suit against Rewards Network in U.S. District Court in 2004 claiming that the Rewards Network system was no more than a loan sharking scam with the cash advance acting as a loan that carries an interest rate of as much as 400 percent.
In late 2006, Rewards Network settled the California litigation for $28 million, and agreed to forego collections from restaurants that were party to the litigation, but admitted no wrongdoing.
"They say, 'We're going to give you a check for $50,000, and you pay us back every time someone swipes a card.' But you pay back double what they gave you, and they take it randomly, and it's all legal. If you're an idiot like I was, you don't read the 64 pages of fine print.
They have all kinds of legal jargon" to explain why the program is not a loan, Rovezzi said.
Rovezzi said he negotiated a pay-off plan for the $70,000 he still owes Rewards Network the same way he negotiated a pay-off plan with the revenue department. "I can negotiate a pay-off with them, or I'm going to file for bankruptcy, and you'll get nothing," he said.
So far, Rovezzi estimates he's paid between 15 and 20 percent of what he owes the revenue department.
Program Proponents
A number of other Worcester area restaurants are also part of the Rewards Network program, according to the organization's web site www.rewardsnetwork.com.
Cyrus Mizrahi, part-owner of Viva Bene in Worcester, has not had the same disastrous relationship with Rewards Network.
"The rate is high, but it has some kinds of advantages. It does marketing and they bring you in customers from out of town," Mizrahi said.
Rovezzi said all of this is happening in the midst of the restaurant industry's slow season, January and February. He said he's comforted by the fact that his restaurants are popular and successful.
Peter G. Christie, president and CEO of the Massachusetts Restaurant Association, said the association takes no position on whether Rewards Network is a scam or legit.
"That's up to the individual restaurants," he said.
Christie said restaurants outside the city of Boston haven't done well this winter.
"Times are tough. Things have slowed down," he said. "There's a lack of consumer confidence, and it's been a pretty tough January. Outside the city of Boston, I don't know of any other area that's doing well."
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