A well-known local couple and family, who once owned a signature restaurant in Woodland Park and played a big role in the push for limited stakes gaming, have lost a key lawsuit with the federal government. As a result, they must repay Uncle Sam nearly $900,000 for unpaid loans and associated costs.
According to John Walsh, the United States Attorney for Colorado, Robert and Marcia Konczak are liable for $884,666 arising from Small Business Administration (SBA) loan guarantees that they failed to pay and fees associated with collection efforts. Walsh said this verdict was based on a recent ruling by U.S. Magistrate Judge Craig Shaffer. The U.S. Attorney indicated that the Department of Justice will now initiate enforcement action, but was sketchy about the details.
At issue is the unsettling fate of a former restaurant the Konczaks owned off Hwy. 24, known as Primos of Chicago and earlier as Zak’s, which shut down in 2007. According to the case file, the corporation included Robert Konczak as president and also involved his son Chris Konczak and his daughter-in-law Keli Konzak. As president, Robert Konczak signed a 30-year note for $684,000 with interest at the rate of 5.314 percent in 2003. It stemmed from the massive renovation required to turn the property into a large restaurant.
The restaurant property eventually fell into the hands of a California holding company and then was purchased and converted into a Denny’s restaurant, under the reign of Pete LaBarre. LaBarre owns a number of properties in Woodland Park.
According to a U.S. Department of Justice press release, the Konczaks were sued in March 2014 by the U.S. Attorney’s Office on behalf of the SBA for their outstanding debt, after the Department of Treasury couldn’t collect this money.
The Department of Justice asserted that the case stems back to 2003, when “Konczak’s Koncepts,” a Woodland Park restaurant company run by the family, obtained a significant loan from the SBA under its “504 loan program.” Under that program, the United States, acting through the SBA, guaranteed 100 percent of the Konczaks’ debt through a debenture. As part of the loan terms, the Konczaks also guaranteed the loan, making them personally liable for the debt, according to Walsh. When Konczak’s Koncepts shut down in 2007, it also defaulted on its obligation to repay the loan. The SBA then assumed the debt, and attempted to recover on the Konczaks’ guarantees, according to the Department of Justice.
But the Konczaks refused to pay, according to Walsh. After several years of unsuccessful collection efforts, the SBA referred the matter to the U.S. Attorney’ Office for enforcement, which led to a trial and ruling by Shaffer. The U.S. magistrate judge ruled that the Konczaks are liable for the full amount of the loan guarantees, plus other mandatory statutory fees resulting from the SBA and Department of the Treasury’s collection efforts. These include a 20 percent debt service fee of $198,029 and a 3 percent fee charge by the Department of Justice, totaling $26,539.
However, it’s still unclear if any appeal rights are available for the Konczaks or what steps will now be pursued by the federal government. A spokesman for the U.S. Attorney’s Office for the District of Colorado couldn’t be reached for comment.
The Konczaks are regarded as popular local business owners. Prior to starting a major restaurant in Woodland Park, they played a big role in the campaign for limited stakes gaming in Cripple Creek and Colorado. They also were the first co-owners and managers of the Johnny Nolon’s casino, which reportedly snagged 40 percent of the Cripple Creek market in the first six months of gaming.
However, the Konczaks’ restaurant debut in Woodland Park, which involved converting a large tire store into an eatery, was extremely ambitious and was part of a family enterprise. Chris Konczak, a former board director of the Woodland Park Chamber of Commerce, was the manager of the restaurant for a number of years.
The closure of Primos occurred following a difficult time for many local businesses and the area, when Woodland Park was clobbered by a huge recession. Plus, many operators suffered from the fall-out from the Hayman fire and several local disasters.
Still, the Department of Justice enforcement announcement is bound to send shock waves throughout the community and bring back memories of bad times for local businesses.