11-10502rRESOLUTION NO. 10502
A RESOLUTION DENYING RENEWAL OF THE ON -SALE INTOXICATING AND
SUNDAY LIQUOR LICENSES FOR HKD, INC., D /B /A JUN BO CHINESE
RESTAURANT, 7717 NICOLLET AVENUE SOUTH
WHEREAS, in October 2010, HKD Lo, Inc., d /b /a Jun Bo Chinese Restaurant
( "Applicant ") applied for renewal of its on -sale intoxicating liquor license and a Sunday
Liquor License from the City of Richfield (the "Licenses "); and,
WHEREAS, the City Council considered the Applicant's application for renewal
of the Licenses on December 14, 2010; and
WHEREAS, on December 14, 2010, there were pending two disciplinary matters
regarding the 2010 Licenses and there also was pending a sales tax dispute before the
Minnesota Tax Court; and
WHEREAS, the City Council extended the 2010 Licenses and continued
consideration of the application for renewal for 2011 until the pending disciplinary and
sales tax matters were resolved; and
WHEREAS, the disciplinary matters have been resubmitted to the City Council
for consideration of a settlement proposal and the Minnesota Tax Court has rendered its
decision in the sales tax dispute; and
WHEREAS, the Applicant's application for renewal of the Licenses for 2011 was
again considered by the City Council on April 12, 2011.
NOW THEREFORE, BE IT RESOLVED by the Mayor and Council, City of
Richfield, Minnesota, as follows:
1. In prior years that the Applicant has held the Licenses, the Public Safety
Department has experienced a significant number of police calls to the
premises.
2. A significant number of those calls have involved situations where it appeared
that the Applicant failed to responsibly dispense alcoholic beverages and to
control the conduct of its patrons. In the 12 -month period from September
2009 to October 2010, there were more than 20 such incidents. Review of
those incident reports reveals:
a. The vast majority of the incidents occurred between the hours of
midnight and 2 a.m., with a significant number occurring
immediately prior to or immediately after closing time. The timing
for these calls, and the number of calls that involve intoxicated
patrons, raise a public safety concern.
b. Many of the incidents involved patrons on or leaving the licensed
premises in a condition of extreme intoxication. Of significant
concern is that a number of instances involved groups of
intoxicated individuals, not just a single intoxicated patron.
C. On at least one occasion, the public safety department reported
that illegal substances, specifically marijuana, were being
consumed on the licensed premises.
d. On numerous occasions, the public safety department was called
as a result of assaults or fights occurring on the premises that
involved intoxicated patrons.
3. The Applicant has engaged in sales practices that show a lack of concern
about the potential for over - serving its patrons. For example, the Applicant
had a practice of selling buckets of beer, where six beer bottles would be
placed in a bucket and sold to an individual. The Applicant has continued this
practice, contending that it should be allowed to continue the practice so long
as minors are no longer permitted in the part of the premises where the
buckets are sold. As another example, public safety told the Applicant's
bartenders to refuse service to an intoxicated individual whose wristband was
confiscated. Immediately after, the bartenders sold two beers to the
individual's companion.
4. A business establishment that sells intoxicating liquor must demonstrate the
ability to strictly comply with all applicable laws and to maintain complete and
accurate business records necessary to establish that compliance. Based on
findings of the Minnesota Tax Court, the Applicant does not meet that
standard. The following court findings raise serious concerns about the
Applicant's capacity and willingness to competently run any business, much
less a business that is involved in the sale of a dangerous substance to the
public:
a. There was consistent and substantial underreporting of tax owed.
Applicant lacked adequate records to permit a full and complete audit.
Up to 62 percent of the daily sales transaction records for the
applicable time period were missing. (Opinion p.10). The Applicant is
required by ordinance to maintain a ratio of food sales to alcohol sales.
The tax court decision establishes that the Applicant does not maintain
reliable records, which casts significant doubt on the accuracy of the
accountant statement provided by the Applicant.
b. During the audit, the auditors requested Jun Bo to keep records about
dances and concerts being held at the licensed premises. Jun Bo was
also asked to keep records about price and attendance. The Applicant
did not comply with that request. (Opinion, p. 13). This finding shows
that Applicant is either unwilling or incapable of complying with
reasonable and lawful requests of government authorities, in order to
document the Applicant's compliance with its legal obligations. The
City Council has no confidence in the Applicant's ability or willingness
to comply with the City's ordinance requirements.
c. Jun Bo admitted that it paid no Hennepin County alcohol sales tax.
(Opinion, p. 15). Again, based on this finding, the City Council lacks
any confidence in the Applicant's ability to comply with all laws
applicable to the sale of intoxicating liquors.
d. Applicant did not maintain accurate or sufficient records to determine
the amount of alcohol sold. (Opinion, p. 16)
e. The auditors gave Applicant multiple opportunities to provide
information regarding purchases and sales made during the tax period.
Despite those repeated requests, the information received was
inadequate and incomplete at best. (Opinion, p. 18). Applicant does
not show the business competency that the City Council expects of
any establishment engaged in the sale of a dangerous substance.
f. Based on the Applicant's "admissions, stories and excuses" for failing
to have records, the Tax Court determined that the Applicant was not
reporting sales to its accountant and that the Applicants knew taxes
were due on the sales. (Opinion, p. 21)
g. The Applicant's record keeping was "woefully inadequate," and its
contention that some of the records had been stolen was "simply not
believable." (Onion, pp. 21 -22)
h. The Applicant consistently and substantially underreported its sales tax
burden to such an extent that the underreporting "could not be
attributed to mere negligence." (Opinion, p. 22)
i. The Applicant provided implausible and inconsistent explanations of its
behavior. The Tax Court found much of Mr. Dan Lo's and Mr. Kee Lo's
testimony to be "not credible," "not believable," and "dubious."
(Opinion, p 23)
j. The Applicant failed to cooperate with the auditor by failing to keep
records as requested by the auditor and failing to turn over records that
had been in the possession of its accountant. (Opinion, p. 23).
5. Based on the Tax Court's findings and its decision to uphold the imposition of
a penalty for fraudulent underreporting of sales tax, the City Council finds that
the Applicant has not shown that it is competent to maintain adequate records
and operate a business engaged in the sale of intoxicating liquor in the
manner expected of licensees in the City of Richfield. The City Council also
has grave concerns about the moral character and repute of the Applicant's
business manager and its chief spokesperson, Kee Lo and Dan Lo.
6. Although Applicant admitted that it owed certain sales taxes, the Applicant did
not pay them. Those taxes are delinquent in excess of one year, and the City
will not issue a license for an establishment that has taxes delinquent in
excess of one year.
7. The Applicant has announced that it has sold the licensed premises and that
it expects to close its business in September 2011. Applicant has no long-
term plans for its business at this location, and that is a recipe for problems.
Applicant has no incentive to make the substantial changes in management
that would be necessary for it to become a reliable and responsible liquor
establishment.
8. For all of the reasons above, the City Council denies the Applicant's
application for renewal of the licenses.
9. The 2010 license is extended until the effective date of this resolution, at
which time all alcohol sales shall immediately cease.
10.This resolution is effective as of i i , 2011 at 12:01 a.m.
Passed by the City Council of the City of Richfield, Minnesota this 12th day of
April, 2011.
ie Goettel, Mayor