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Guilty plea for ex-restaurant king Kwon

Published December 5, 2012 1:54 pm

Fraud • He faces sentencing for lying to 'best friends' to obtain loans.
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Once-thriving restaurateur Gene Kwon on Wednesday pleaded guilty to theft, securities fraud and a pattern of unlawful activity for misleading his friends to obtain loans in an effort to prop up his failing business empire.

"The reason I'm here today is because I've wanted to take ownership of what I've done — I am very sorry," Kwon told 3rd District Judge Judith Atherton.

Facing trial, Kwon, 45, instead pleaded guilty to one count of theft, three counts of securities fraud and one count that involved a pattern of unlawful activity, all second-degree felonies. Each charge carries a prison term of one to 15 years, which can be ordered to run consecutively or concurrently.

Sentencing is scheduled March 21 for Kwon, who at one time operated nearly a dozen restaurants in the Salt Lake Valley.

Five of the seven victims named in the complaint were in court Wednesday. All declined to comment after representative from the Utah Attorney General's Office asked them not to speak to a reporter. One victim did say that he could not talk until after the sentencing "because too much is at stake."

During a 45-minute private conference between the judge and attorneys, Kwon sat alone at the defense table, head bowed, waiting for the hearing to begin. He had swiveled his chair so that he faced away from the victims he acknowledged to misleading in 2005 and 2006.

"I have learned many things from this," a tearful Kwon said after the hearing. "I've learned to be up front. Some of these people were my best friends."

Since the charges were filed in 2010, Kwon said he has been living in Salt Lake City and with a friend in Park City, working at an unnamed logistics firm.

During Wednesday's plea hearing, prosecutor Che Arguello said Kwon made untrue statements to investors or failed to disclose information in order to secure loans. And when he obtained the financing, Arguello added, the money was spent on pre-existing debts, not for what the money was intended.

After the hearing, defense attorney Marcus Mumford said Kwon took on too much debt, then asked for loans from friends carrying an interest rate of 30 percent to 60 percent.

"He thought he could grow his way out of debt, but things got out of control," Mumford said. "The restaurants brought in significant revenue, and he had $16 million in real estate interests. He was ambitious and capable. He had real abilities to put together a business empire."

In early 2000, Kwon seemed the Wunderkind of Salt Lake City's upscale eatery business, owning historic buildings and operating some of Utah's most popular restaurants. But almost from the outset, prosecutors allege, Kwon was taking loans to stay afloat, even as he opened more restaurants.

From April 2005 to November 2006, Kwan raised $2.7 million from seven Utah investors, prosecutors say. He offered promissory notes, telling them they would have a substantial profit with little or no risk. But he did not disclose he had been named in numerous tax liens from 1998 and continuing through 2003 totaling hundreds of thousands of dollars, which eventually were repaid.

The loans ostensibly were to help finance the Ruth's Chris franchise and a business that imported silk flowers for Kwon's other restaurants.

Creditors accused Kwon of squandering money on fast cars and exclusive country clubs. His attorney said Kwon lived the life "you'd expect a successful individual to live."

Kwon's restaurant career began in 1991 when he started running his family's Mikado restaurant in downtown Salt Lake City. Within four years, he opened a second Mikado and then the Kampai in Park City. He eventually owned 11 upscale restaurants and had title to six commercial buildings. In 2005, he was named the Ernst & Young Entrepreneur of the Year — about the time he began turning to his friends for loans.

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Charges draw guilty plea

Theft • One count, second-degree felony

Securities fraud • Three counts, second-degree felony

Pattern of unlawful activity • One count, second-degree felony

Sentencing • March 21, before 3rd District Judge Judith Atherton