HATTIESBURG, MS (WDAM) - One of the founders of Mugshots Grill and Bar is facing a federal lawsuit after some of his business partners said he was doing business behind their back.
Chris McDonald is accused of violating the Racketeer Influenced and Corrupt Organization Act, breach of contract, negligence and fraud.
The federal lawsuit filed in U.S. District Court in Jackson alleges Chris McDonald fraudulently obtained two loans from Priority One Bank in Hattiesburg secured by collateral property owned by the Mugshots Birmingham Entities.
According to the lawsuit, McDonald obtained the first loan in December of 2015 and a second in March of 2017 from Priority One Bank.
The lawsuit was filed by ALG Vestiva Hills, LLC, Mugshots BJCC, LLC, Mugshots Inverness Corners, LLC and individual Birmingham business partners on Wednesday, September 27, 2017. Those plaintiffs represent restaurant locations in Alabama.
According to the 20-page lawsuit, the Mugshots Birmingham Members were told by McDonald that a small loan was required for Mugshots Inverness (a restaurant location), but neither the full amount of the loan or how the Mugshots Birmingham Entities benefited were ever disclosed to members.
The lawsuit also states none of the members have seen documentation or confirmation that the money in the December loan was used for the benefit of the Inverness restaurant.
According to the lawsuit, McDonald repeated the "fraudulent activity" in March of 2017 by obtaining another loan from Priority One Bank, for an unspecified amount, or by refinancing the December 2015 loan.
The Mugshots Birmingham Members state they have not seen documentation nor had any confirmation that the money obtained in either loan was used for the benefit of either Mugshots Inverness or BJCC.
The document goes on to state Defendant GM (Grand Management, LLC), was "grossly negligent" in managing the restaurants because it "failed to maintain the financial records and make payments as required. According to the suit, Grand Management, LLC is owned by McDonald.
Members said that negligence caused the Mugshots Birmingham Entities to "become delinquent in payment of over $200,000 in federal, state and local taxes. The members had to "quickly catch up" on payments and hire an accountant "to rectify the improperly maintained financial records."
Among of a number of payouts in the lawsuit, the business partners allege over $118,000 was spent on advertising and marketing, which members believe was given to McDonald or one of his business entities without proper consideration.
Mugshots BJCC said it had to pay $4,757.50 to an interior design company for "unknown services," which ended up being interior design services at McDonald's home.
In a request for judgment, the Birmingham partners want McDonald to be disassociated from the restaurant entities. They also request compensation for damages and attorney fees.
McDonald, a University of Southern Mississippi graduate, opened the first Mugshots in Hattiesburg in 2004. According to the company's website, there are currently 18 locations in Mississippi, Alabama and Louisiana.