Six Colorado residents are suing a shuttered Colorado Springs-based restaurant company, claiming it convinced them to invest by issuing misleading information and name-dropping celebrities.
The investors — Donald Bibb, Marques H. Harris, Rick Joseph Colombo, Loren Williams, Ken Jorgensen and Douglas B. Pace — filed a lawsuit against Southern Concepts Restaurant Group in federal court in Denver on Monday.
The lawsuit also names several companies allegedly involved in the operation of Southern Concepts’ restaurants. Those restaurants — Southern Hospitality locations in Denver and Lone Tree, and Carve Barbecue in Denver — abruptly closed in June.
An attempt to reach a former Southern Concepts executive for comment was unsuccessful. The company purchased the right to franchise the Southern Hospitality restaurant in Colorado. The original location is still open in New York City.
The lawsuit revolves around alleged company practices that the plaintiffs believe constituted fraud, negligence and violations of the federal Securities Act.
According to the suit, Southern Concepts executives told potential investors that Southern Hospitality co-founders Justin Timberlake and Ryan Tedder, a member of the band One Republic, would make public appearances at the Colorado restaurants and advertise for them on social media.
Although Timberlake and Tedder did help start the company, they were not involved in marketing the new Colorado restaurants, the lawsuit says.
According to the lawsuit, Southern Concepts underwent several mergers and name changes between 2011 and 2017 in an effort to confuse investors. The changes also allowed executives to issue additional shares of stock, giving them more control of the company, according to the plaintiffs.
The plaintiffs also accuse Southern Concepts of questionable hiring practices, saying it brought on 25-year-old Mitchell Roth as president in 2014, despite his lack of former work experience. Roth is the son of a former director of the company, according to the lawsuit.
The plaintiffs also claim that, in 2013, Southern Concepts executives misled investors into believing the company had an ownership interest on some land in Colorado Springs.
Investors are asking for damages, and for the court to declare the defendants hold the plot of land in a constructive trust for the investors. They are represented by Michael Davis of DLG Law Group LLC. Davis did not respond to a request for comment.
This isn’t Southern Concepts’ first lawsuit.
After the restaurants closed, Shamrock Foods Co. sued the company for $50,000 over an alleged unpaid loan. Southern Concepts’ landlord at its downtown Denver location also sued, stating the restaurant broke its lease and owed $200,000 in rent payments.
At the time Southern Concepts’ three restaurants closed, SEC filings showed the company reported a net loss of $2.7 million in a nine-month period the previous year.