What Was Really Going on Behind the Closing of Foreign Correspondents?
All was not well behind the scenes at Foreign Correspondents.
Photo by Chuck Cook Photography
As the Treadsack group's new restaurants were drawing local and national accolades, raising the city's dining profile and making rock stars out of its owners, the Texas Comptroller's Office was threatening to seize cash for back taxes, the IRS slapped the group with $1.1 million in liens and two banks stopped honoring checks written by the company.
The financial difficulties coincided with the surprise closing of perhaps the group's most acclaimed concept, Foreign Correspondents, which shuttered in December, four months after Bon Appétit listed the farm-to-table northern Thai eatery on its list of the 50 best new restaurants in the country, and just 14 months after it opened.
Treadsack — the portmanteau of co-founders/co-owners Chris Cusack and Joey Treadway — made the announcement the day after the Houston Chronicle reported the resignation of the Heights restaurant's esteemed chefs, PJ and Apple Stoops. One day later, CultureMap Houston reported that another Treadsack concept, a bar called Canard, was closing as well. (Treadway, and another partner, Benjy Mason, whose name apparently couldn't be shoehorned into "Treadsack," did not respond to multiple requests for comment.)
It was an ignominious end to a restaurant that seemed to have it all — delicious food, a pretentious name that cleverly gave no indication that it was in fact a restaurant, and an impeccable pedigree: Treadsack had already established the immensely popular Down House.
The sudden closing of Foreign Correspondents seemed to bring — wait for it — employees' simmering concerns to a boil. Just after the restaurant closed, a former employee of a Treadsack restaurant asked for questions on Facebook, starting a thread riddled with complaints from current and former employees, who claimed to have received multiple bounced checks.
The Houston Press heard rumors of the checks in early 2016, but — thanks in part to an airtight non-disclosure agreement that all Treadsack employees must sign — it was difficult to get people talking. (Even in the absence of weird confidentiality agreements, many in the hospitality industry are reluctant to speak even on background, for fear of being blacklisted.)
But in public records, as well as internal documents obtained by the Press, the portrait of Treadsack's concepts that emerges is different from the one portrayed in fawning media coverage.
The public face of Treadsack, 35-year-old wunderkind Chris Cusack, was named one of the "5 people who could shape Houston's future" by the Houston Chronicle, and was compared to King Midas elsewhere. But Cusack is shy when it comes to anyone who questions the narrative.
Cusack was not interested in speaking to the Press about the material we obtained. And while Cusack wrote on the Facebook thread, "I have nothing to hide and will do my best to be thorough and transparent," Cusack's definition of transparency diverges from the norm: In a conversation with the Press last week, he declined to even acknowledge Treadsack's federal and state liens, which are public records.
"I won't comment on anything further until I talk to my attorney," Cusack said when asked about the liens.
The unemployment and payroll tax liens might correlate to the mind-boggling expansion Treadsack undertook in 2015, opening Foreign Correspondents and another restaurant, Hunky Dory, in October 2015, followed by Bernadine's in December. This was followed by the bar Canard in March 2016.
One former employee believes Cusack and Treadway were able to entice investors based on the breakout success of Down House, which opened in 2011. Treadsack raised enough capital that it was able to woo some of the city's — if not the country's — most talented chefs. But the ability to maintain one or two successful restaurants doesn't necessarily indicate an ability to oversee such a rapid expansion.
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.
The memos show that various general managers constantly sought help from the corporate office to deal with employees whose checks continually bounced. The correspondence suggests that Cusack preferred triage to long-term solutions, sometimes resorting to paying employees of one restaurant out of another's account.
"Paychecks bounced because the restaurant didn't make any money," Cusack told CultureMap after Foreign Correspondents closed. "All those we’ve replaced or given cash on the spot. I will never let anyone go unpaid."
He told the Press the same thing last week: "I'll continue to say as I have from the very beginning of any of this, that every person who's ever worked for me has gotten paid."
But records also show that people who didn't work for Treadsack got paid.
"Putting a nanny on payroll," Treadway wrote the corporate office on May 18.
"She will be paid out of management, correct?" the corporate employee replied. "...Also, is this just going to be an extra salary or will it be docking off of your check like your sister was?"
Treadway replied, "Just pay her additional now. $3,000 a month. When can she get on insurance?"
Treadway's sister, mother and mother-in-law have all been listed as managers, whose combined annual salaries exceeded $100,000, according to payroll records. In a June exchange about a 401(k) program, a corporate employee asked Cusack, "It is also asking to list all family members of the owner that work for the company. Should I list Joey's mother and sister given the circumstance?"
"I wouldn't," Cusack replied.
Treadway did not respond to multiple requests to clarify the job descriptions of the nanny and his family members. But even family members had to deal with bounced checks, according to the memos.
On June 29, a corporate employee wrote to Cusack: "Joey's mother in law is at the bank and can't cash her check."
Cusack replied with, "Tell her I'm waiting in line to cover the deposit...In line in the drive through."
In memos between March and July 2016, exchanges between Cusack and a corporate employee indicated that the Texas Comptroller's Office had frozen nearly all of the restaurants' accounts for nonpayment of taxes and bonds.
"The Comptroller's office just called to say that all of our accounts have gone into collections," the employee wrote in early April.
This was apparently news to Cusack, who wrote, "What specific accounts....I thought we were more or less up to date."
When asked by a corporate employee in June if one of the restaurant's sales taxes from March should be paid, Cusack replied, "Definitely not. We can't have [the restaurant's] payroll getting fucked."
Despite these problems, Cusack gave off a positive, self-congratulatory vibe in his missives, writing in a company email August 2016:
"I often have to step back from the day to day and really think about why we are where we are and I remind myself that we did something that is next to impossible, opening five concepts within one year and five days.... Down House took a year and a half to really make any money, and we were in a huge economic boom at the time. We're less than a year in. We have an incredible product and people love what we do. When we make it through to the other side, we are going to be fucking bulletproof."
In lieu of actually speaking, Cusack told the Press he'd provide a statement. What he provided instead resembles a meandering, solipsistic, 2,000-word treatment for a particularly awful made-for-network-TV movie about a couple of scrappy young restaurateurs who make it against all odds! (Cusack also posted the statement on Facebook).
Cusack pinned much of the blame for back taxes and liens on a previous bookkeeper's alleged embezzlement:
We began to have issues with our bookkeeper which made us slow to recognize our deteriorating financial situation; then in October 2015, the day after letting the bookkeeper go for failing to disclose outstanding obligations, we discovered that she’d been embezzling funds regularly for over a year. She had carefully covered her tracks and hidden expenses deep in the thousands of checks issued annually, but after extensive use of an outside accounting firm we now have charges filed with the police and the district attorney’s office. One of the payees was the IRS, who we ultimately entered into an agreement with to pay off a tax lien we incurred through this fraud.
Cusack didn't identify the bookkeeper, which makes it difficult to confirm his contention that she was charged with a crime. But the timeline coincides with a bookkeeper who, at the time of her employment at Treadsack, was on probation for a 2005 theft charge. Her probation was satisfactorily terminated in March 2015. A court records search did not turn up any new theft charges.
An August 2016 exchange between Cusack and a corporate employee refers to a bookkeeper with a "rap sheet."
"Desperation really shows one's true character," Cusack wrote, ostensibly without irony. "Somehow or another, she got underwater and resorted to stealing."
Cusack also addressed one of the issues that appears to have upset many employees who couldn't cash their checks: the dude bought a freakin' Tesla.
We have certainly made a number of mistakes, as well as plenty of decisions that people can certainly criticize. When we finally got all the restaurants open in December 2015 I told myself that I was going to do one nice thing for myself and buy a Tesla. Elon Musk is one of my personal heroes and so I legitimized the fuel savings and upkeep, and paid $2500 down and incurred a increase in car payment of a few hundred dollars a month from my previous vehicle, a four-year-old GMC Sierra.
The statement neglects to clarify if Treadway's nanny worked as a line-nanny or a sous-nanny; it does address Treadway's family members:
My partner Joey has put several family members over the years on payroll with the expectation that they help around the office when they are able with payroll, accounts payable, and as a personal assistants for us, an expense that he then deducted from his own salary. Additionally, Joey’s wife has worked (and continues to work) 30-40 hours a week in the office as a volunteer to help keep labor costs down.
Cusack also cited construction delays, an economic downturn and "unexpected back expenses" as contributing factors. But, he stated, he and his partners scrambled to keep things afloat:
We had fallen behind on taxes, on vendor bills, and most importantly, were struggling to make payroll every week. We still believed that our restaurants were sound businesses and would ultimately dig themselves out of this hole, but to get through the immediate future we needed to take fairly drastic action. In desperation, we begged and borrowed several hundred thousand additional dollars from friends, investors, and family to keep everything afloat until the restaurants could open. We stopped regularly depositing our own paychecks, often putting our own accounts into overdraft to make sure that all our employees would get paid in a timely manner. On top of that, my partners, Benjy Mason and Joey Treadway, poured tens of thousands of dollars of their own savings into the company to make sure that we could cover payroll and other expenses every week. Unfortunately, this still wasn’t enough.
And, lest any employees erroneously believe that Cusack, too, hasn't suffered, there's this:
The stress of all of this has caused the end of my marriage, strained my friendships, and caused countless nights of lost sleep and anxiety. During all of this time we have always prioritized our employees first, followed by our guests, investors and vendors. We took pay cuts, shouldered increasingly massive amounts of personal debt, and sucked it up and came to work every day to try to get through this.
What's still unclear, though, is why the partners, seeing the writing on the wall more than a year ago, didn't cut their losses instead of basking in the continued media attention, which would only make the closings more conspicuous. But we understand that some things are more important than others.