Tavern restaurateur countersues his mom, says she pilfered funds

A Denver restaurateur who is being sued by his mother has countersued her for allegedly spending company funds on Denver Broncos tickets and other personal items.

Frank Schultz, who along with his mother Terry Papay founded Tavern Hospitality Group, was sued by Papay and her husband Albert Papay on March 15. Also listed as plaintiffs are nine companies behind the mother-and-son duo’s restaurant and real estate holdings.

The Papays accused Schultz of failing to pay back $3.7 million in loans they gave him and of funneling “corporate assets for his personal use.” Their lawsuit seeks at least $7.75 million.

In a statement to BusinessDen last month, Schultz said he was “disappointed” that his mother would make “a years-long family dispute open to the public” and alleged that “her lawsuit mischaracterizes the facts and omits key information.” Schultz said he was only trying to protect company funds from his mother after uncovering “several concerning facts.”

And on April 24, Schultz put several of those supposed facts into a countersuit.

Schultz said his mother completely controls their companies’ finances and has denied him access while diverting funds for her personal use. For example, the bank account of Tavern Uptown at 17th and Pearl, which is now closed, shows $83,000 in odd expenses between 2019 and 2022, such as money transfers and football ticket purchases, Schultz says.

“As Terry Papay’s strict control over the company finances grew, Schultz became concerned that her behavior would affect business operations, and they did,” his countersuit claims.

A company controller and “numerous other employees” quit after being mistreated by Papay, according to her son. She also stopped making timely business payments and meeting tax requirements, Schultz’s countersuit alleges.

Schultz said it was the Papays’ idea to loan him money that they now claim he hasn’t repaid. The Papays knew he couldn’t repay and assured him that he wouldn’t have to, according to the countersuit. Schultz alleges the loans were a “deceit based on fraud.”

The countersuit does not ask for a specific dollar amount in damages because, Schultz says, he doesn’t yet know how much money was wrongly diverted from his companies.

“We will respond in court in due course but otherwise have no comment,” said the Papays’ attorney, Leah Capritta with the Denver office of the law firm Holland & Knight.

Tavern restaurants operate in Littleton and Lowry but locations in Uptown and the Denver Tech Center are now closed. Tavern Wash Park closed in 2018. Tavern Downtown and Cowboy Lounge, which Schultz also owned, closed in the fall of 2019, months after Schultz sold the real estate for $17.75 million. Tavern Platt Park closed at the end of 2019.

Tavern Hospitality also operates non-Tavern-branded restaurants, including Whiskey Tango Foxtrot in Union Station North and Otra Vez Cantina on the 16th Street Mall.

This story was reported by our partner BusinessDen.

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