Disputes Doomed John Daly Steakhouse

The John Daly Steakhouse, at 912 Front St. in Conway, opened in September 2017. Its failure only 10 months later has created a welter of legal conflicts.

The John Daly Steakhouse belatedly opened on Front Street in Conway in September 2017 with high hopes of becoming the flagship of a national chain.

Instead, the restaurant named for the colorful Arkansas golf pro crashed in just 10 months. Its failure has created a tangle of legal issues for Conway businessman Sam McFadin, the subject of a previous lawsuit alleging fraud and embezzlement, and his business associates.

Since the closing of the restaurant in July, McFadin has been accused in a lawsuit of transferring assets from the John Daly restaurant to a new restaurant in Little Rock, Live Life Chill, in an attempt to avoid paying creditors. McFadin denied the allegations.

Problems also have multiplied for the S.A.M. Group LLC, the company behind the steakhouse.

On Aug. 30, a minority owner of the group, Adam Waldron of Dardanelle, was sent to jail, where he stayed for more than two weeks, on a civil contempt charge for making false statements in one of several collection lawsuits against the S.A.M. Group and the restaurant.

On Sept. 14, four days before McFadin was scheduled to appear before Washington County Circuit Judge Doug Martin for a contempt of court hearing in that collection case, McFadin personally filed for Chapter 11 bankruptcy reorganization.

The bankruptcy filing resulted in the hearing being canceled and Waldron being released from jail.

McFadin then filed Chapter 11 bankruptcy reorganization for the S.A.M. Group on Sept. 24.

In both his personal bankruptcy and the S.A.M. Group’s filing, McFadin accused Waldron and a former partner, Mike Vickers of Conway, of embezzlement.

McFadin told Arkansas Business that the two stole more than $85,000 from the project.

“I don’t know where [McFadin’s] coming up with the things he comes up with … but that’s so far from the truth,” Vickers told Arkansas Business last week.

Vickers in turn accused McFadin of embezzlement, saying that’s why he left the business at the end of November 2017, about two months after John Daly Steakhouse opened.

Waldron, who is a senior vice president at River Town Bank in Dardanelle, told Arkansas Business that McFadin’s allegations were “comical and not true.” But he declined to comment further because of the pending litigation.

Meanwhile, Larry Tramel, the former general manager at John Daly Steakhouse, landed a nearly $60,000 judgment in June against the restaurant in a lawsuit alleging unpaid wages and an unpaid loan.

Then, Tramel alleged in a subsequent lawsuit, McFadin opened a new restaurant in Little Rock’s River Market District called Live Life Chill as part of a corporate “shell game” to frustrate him and other creditors of the steakhouse venture.

The defendant in that lawsuit is Live Life Chill, not McFadin. McFadin said his mother, Kim Rivers, is the owner of Live Life Chill, which opened in August. The restaurant denied Tramel’s allegations in its court filings.

“I have no role in Live Life Chill, absolutely zero,” McFadin told Arkansas Business. He said he has a construction background and “performed duties as far as renovating the facilities.”

In addition, “the whole entire facility of John Daly’s is still intact,” he said. “All the kitchen equipment is there.”

A vendor, Amanda Hughes Propst of Little Rock, claims McFadin had a significant role in Live Life Chill. She sued him in Little Rock District Court on Oct. 30 for $1,450 worth of work done after McFadin hired her to produce a website and menus for Live Life Chill. Hughes said she completed the work on Sept. 5 but was not paid.

McFadin told Arkansas Business last week that the case was settled, and he denied being involved in Propst’s hiring.

Road to John Daly
In December 2014, McFadin sold his majority interest in M&M Environmental Oil Services LLC of Conway for $7 million to Omega Capital of Tulsa.

The company’s name was changed to the similar sounding M&M Environmental Group LLC.

Instead of soaring under the new ownership, M&M Environmental Group went into a tailspin.

It filed for Chapter 7 bankruptcy liquidation in February 2016 with $8.4 million in debts and $3.2 million in assets.

M&M accused McFadin of fraud and embezzlement and transferring assets to frustrate creditors. That lawsuit is pending in U.S. District Court in Little Rock. McFadin denied the allegations, and the case is set for trial on March 11.

In early 2015, after McFadin sold his majority interest in M&M Environmental, he met John Daly, the golfer who grew up in Dardanelle. McFadin said he was with Adam Waldron, the banker, and they talked about buying Daly’s Lion’s Den Golf Club in his hometown.

McFadin said the three played golf and had a few drinks. “I made it very clear I didn’t feel comfortable buying a golf course and had a few more drinks and then talked about a restaurant opportunity,” McFadin said. “And that’s about how it came out.”

Mike Vickers said Waldron approached him by saying that McFadin, Waldron and Daly wanted to start a restaurant but didn’t know how.

“Sam offered me 33 percent of the business to be the brains behind it,” Vickers said. “So I said, ‘Sure, I’ll sign up.’

“It was a sad mistake,” he said.

Visions of Expansion
The S.A.M. Group was incorporated on June 15, 2016. By the end of the month, it had spent $250,000 on two buildings in downtown Conway that would be the home of John Daly Steakhouse.

The seller of the buildings was another McFadin company, McFadin Global, which had paid $195,000 for the properties in February 2015, according to Faulkner County real estate records. McFadin said he invested about $50,000 in the buildings and didn’t profit from the sale to the S.A.M. Group.

The S.A.M. Group borrowed $2 million from First Community Bank of Batesville. McFadin said he invested $1.5 million, using as collateral his 4,652-SF house overlooking the Arkansas River west of Conway. He had bought the house for $1 million in March 2015.

Waldron, who was the CFO of the LLC, told Arkansas Business in September 2016 that the goal was to have the restaurant opened by Valentine’s Day 2017, but “that’s going to be a stretch.”

Also included in the development were four 1,000-SF lofts for tenants that would be on the second floor.

Waldron also told Arkansas Business in 2016 that he wanted to follow the Conway location with John Daly Steakhouses in the Little Rock area and northwest Arkansas. After that, expansion outside the state was part of the vision.

Cash Flow Problems
Larry Tramel was hired as general manager of the restaurant in June 2017 at an annual salary of $80,000 plus incentives based on performance, according to the lawsuit he filed against John Daly Steakhouse No. 1.

Before it opened, the restaurant “began experiencing significant cash flow issues,” Tramel said in the suit filed in Faulkner County Circuit Court. Tramel agreed to defer the payment of his salary until the restaurant opened, and he agreed to pay out of his pocket $1,000 a week to the restaurant’s head chef until the opening.

The steakhouse finally was opened at the end of September 2017, with Daly himself making an appearance.

Golf magazine noted the opening on its website. “Daly has forayed into all kinds of businesses in the past, with anything from wine to the very popular apparel company Loudmouth Golf,” the magazine said. “Will his steakhouse be a hit? You might have to visit Arkansas to find out.”

Daly received $25,000 from the S.A.M. Group, according to McFadin, who accused the golfer of not fulfilling all of his obligations. The S.A.M. Group said in its bankruptcy filing that it has a potential lawsuit against Daly for misrepresentation and possible other claims.

Daly could not be reached for comment.

Opening the doors didn’t solve the cash flow problems, according to Tramel’s lawsuit. He said in the lawsuit that he loaned the restaurant $25,000 on Nov. 2, 2017, so it could make payroll. Vickers also wasn’t happy with the restaurant’s situation.

He accused McFadin of embezzling the first weekend the restaurant opened.

“I thought to myself, ‘Do I take him to court for embezzlement or stealing or do I just get the heck out of here?’” Vickers said. “By Thanksgiving [2017], I decided I needed out of here.”

McFadin denied the allegation that he embezzled from the company, describing Vickers as “disgruntled.”

Lawsuits involving the restaurant project started to stack up in Faulkner County Circuit Court. In August 2017, Remington Design Group of Little Rock sued S.A.M. Group to collect $11,500 for interior design work. That case is pending as a result of the S.A.M. Group’s bankruptcy.

In December 2017, C.R. Crawford Construction Inc. of Fayetteville sued the S.A.M. Group alleging that it was owed $158,000 for work done on the restaurant and the lofts.

Calling Mom
As the lawsuits moved their way through the courts, McFadin turned to his mother, Kim Rivers, for help in January 2018.

“She took over mitigating the John Daly project and figuring out how to help manage and distribute capital accordingly,” he said during a bankruptcy proceeding in October. “She’s been in finance for 30 years.”

By that time, ownership of the S.A.M. Group was divided between Waldron Investments LLC (17 percent) and Ironhorse LLC of Conway (83 percent). McFadin said his ex-wife, Chelsea McFadin, owns Ironhorse through a personal trust.

Sam McFadin said he has no ownership interest in the S.A.M. Group, although he is listed in its bankruptcy as its CEO. In an email to Arkansas Business, McFadin also denied being the company’s CEO.

In June, C.R. Crawford received a judgment for $174,000 and went after S.A.M. Group assets to settle the debt. With creditors circling, John Daly Steakhouse closed in July.

Waldron, who was listed as the managing member of the S.A.M. Group, said in a sworn statement filed on July 20 that the S.A.M. Group “has no ownership interest in any personal property located at 910/912 Front Street.” Waldron went on to say that all of the “various personal property … was purchased by and is owned by other legal entities.”

C.R. Crawford’s attorney, Jason Wales of Fayetteville, challenged the truthfulness of Waldron’s statements in a motion for contempt and sanctions. A contempt of court hearing was held on Aug. 30, where Washington County Circuit Judge Doug Martin found that Waldron’s sworn statements were “materially and unequivocally false.”

Martin said Waldron “willfully and intentionally violated prior orders of this Court and, in the process, frustrated and delayed [C.R. Crawford’s] efforts to collect the Judgment by making false statements to the Court in this case.”

Waldron was sent to jail and ordered to stay there until he supplied a complete and accurate accounting of all items. He remained in jail until Sept. 14, when McFadin filed for Chapter 11 bankruptcy reorganization.

In an Oct. 1 court filing, Waldron asked that the judge reconsider his finding. Waldron said he had merely signed sworn statements prepared by the S.A.M. Group’s attorney, Chris Rippy of Conway.

“The only misdeed of Mr. Waldron was trusting and following the instructions of the LLC attorney who abandoned him,” the filing said.

Rippy didn’t return a call for comment.

While Waldron was in jail, C.R. Crawford pushed forward with sanctions against McFadin. On Sept. 4, the construction company filed a motion requesting that McFadin appear before Judge Martin and answer questions about why he shouldn’t be sanctioned.

Martin ordered McFadin to appear in court on Sept. 18, but that was canceled as a result of McFadin’s personal bankruptcy. He listed $7.2 million in debts and assets of $5 million.

The bankruptcy reorganization McFadin filed for the S.A.M. Group on Sept. 24 listed $4 million in debts and $1.4 million in assets.

“I’ve never been in the restaurant business in my life before this,” McFadin said. “I’m an oil and gas guy. … That’s who I am, and unfortunately, I’ve got a really hard lesson learned that I am not a restaurateur in any way, shape or form.”