Financial Woes Close 3 Papashon Restaurants
The Woodland Hills company that operates the Papashon chain of French-Asian restaurants has closed three of its four eateries amid financial problems and reports that it is under investigation by the Securities and Exchange Commission, according to former company executives and employees.
The Ponzu Cos. Inc., a subsidiary of Papa Holdings Inc., closed its plush Encino restaurant Sunday, a day after it shuttered its popular Pasadena outlet. The move left vendors and nearly 50 employees unpaid, according to two former managers and the former executive chef.
Employees and worried investors say they have been unable to speak with any of the company’s principals, or its attorney, for months.
On Wednesday, Ruth Papa, whose ex-husband and son run the company, was busy supervising the loading of food and liquor from the Encino bistro onto a white “Rent It” truck parked on Ventura Boulevard. She declined to talk about the restaurant’s demise or the fate of the family-owned corporation.
Asked about the reported SEC probe, she referred the matter to the company’s attorney, Tom Stepp of Newport Beach, saying she did not know what information she was allowed to disclose.
Reached Thursday, Stepp refused to comment.
Ruth Papa said the chain, which opened its Long Beach branch in October, will “probably open another restaurant somewhere else.”
“We would like to,” she said.
In addition to closing the Pasadena and Encino Papashons, the company closed the Beverly Hills restaurant in February. The Long Beach Papashon remains open.
SEC officials declined to confirm or deny that the company is under investigation.
But three former top company employees said members of the Papa family, which owned the chain, spoke openly about SEC scrutiny with employees, many of whom are now out of work. The former employees--general manager Thomas L. Anderson, Encino restaurant manager Diana Curland and executive chef Sean Sheridan--also said a reference to the probe was included on the company’s investor hotline.
Records from the secretary of state’s office list the president of the Ponzu Cos. Inc. as Ramon Papa and the registered agent as his son, Jonathan. Neither could be reached for comment.
The Ponzu Cos. Inc. and Papa Holdings had filed papers with the SEC to allow them to sell unregistered shares under certain restrictions, including no general solicitation of investors.
Sheridan said Ramon Papa told him that the agency was scrutinizing how, and by whom, preferred shares in the company were sold.
Former Ponzu executives and employees said that some of the money raised to expand the four-restaurant chain, estimated at more than $10 million, came from investors solicited by telephone.
They said that among those calling was Chris Rawlings, the Woodland Hills man who federal authorities said was running a telemarketing scam before he was killed in February, apparently during a botched follow-home robbery. Police are also checking whether Rawlings’ business dealings led to his death.
Sheridan, the executive chef, said he met Rawlings several times, adding that Rawlings worked on the company’s behalf several years ago but had no recent involvement.
Curland, of the Encino restaurant, said she catered a memorial service for Rawlings at Jonathan Papa’s Calabasas home.
Sheridan, whose first name forms the “shon” in Papashon, said he knew little about the financial dealings of the company.
“That end of the business was none of my business,” said Sheridan, who helped to open the first Papashon restaurant in Pasadena in 1994. “I’m the chef; that’s what I do.”
But he said that several months ago, he sat down with Ramon Papa, whom he considered a close friend.
“He told me there was an investigation. A week later, he said he was going to take some time off,” Sheridan said.
Sheridan said that in late February or early March, Ramon announced to a group of managers that “all the money was frozen by the SEC.” About the same time, he added, the managers learned that the corporation’s Woodland Hills office had closed.
Sheridan said he is still trying to collect more than $2,000 in back pay from the company.
Wayne Hardy, an insurance and mutual funds broker from the Denver suburb of Englewood, said that a year ago he invested $17,500 in preferred shares offered by Papa Holdings after receiving a telephone solicitation.
Hardy said he called the corporate office in early spring and heard a recording that mentioned the SEC investigation. He said the recording implied that it was part of standard SEC reviews that take place when a company is planning an initial public offering.
“It indicated that we should not be concerned, that we couldn’t talk to anybody because of the pending IPO,” said Hardy, who said he holds little hope of getting his money back.
An SEC spokesman said no IPO registration is on file for either Ponzu or Papa Holdings and that the SEC scrutiny of an initial offering is called a “review,” not an investigation.
Anderson, who said he, too, is owed back pay, estimated that he has spoken with 50 nervous investors in the past month alone. “They called the restaurants, because they weren’t getting any information from anybody,” he said.
With an inventive East-Asian inspired appetizer menu and curved seascape mural, the Encino restaurant carried the Pacific New Wave theme in decor and dish. The largest branch on the family-run tree, it also offered jazz, attracting such notables as guitarist John Pisano and the Jennifer York Quartet.
Past editions of Zagat, the noted restaurant guide, gave the Pasadena restaurant high marks for food and decor, lauding Sheridan’s “exciting menu.”
“We are all a little bitter and a little shaken up,” said Anderson, who also owns shares in the company. “It’s a little disappointing that we put that much work into it and it didn’t survive.”
Times staff writer Scott Glover contributed to this story.
