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Apr 17, 2019 12:06 PMPublication: The Southampton Press

State Tax Department Says Little Red, Red Bar Owe More Than A Half Million Dollars

Little Red in Southampton Village on April 16, 2019. BRENDAN J. O'REILLY
Apr 17, 2019 12:06 PM

Kirk Basnight and his Southampton Village restaurants, Red Bar and Little Red, have accumulated more than a half million dollars in tax warrants for failing to remit sales and withholding taxes, according to the State Department of Taxation and Finance.

Mr. Basnight said Wednesday that he is working feverishly to pay the state and he is hoping to reopen both restaurants, which closed for the season in the fall, in the third week of May—though he emphasized that the target is not firm and the opening date could change.

A total of 19 tax warrants were filed against the restaurants and Mr. Basnight as an individual between February 2018 and March of this year. Unresolved tax warrants can lead to the Department of Taxation and Finance seizing a business and eventually selling its assets to resolve a tax debt if a business owner does not make a voluntary effort to work with the department toward a solution.

Neither Little Red nor Red Bar has been seized, and Mr. Basnight says he is making that effort.

“I never for a minute tried to act like I did not owe it,” he said Wednesday, adding that tax payments will resume upon the restaurants reopening.

The warrants add up to $537,383, but the balance as of Tuesday afternoon was $560,986, State Department of Taxation and Finance spokesman James Gazzale said. He explained that the warrant total reflects the balance of all of the warrants at the time they were filed with the Suffolk County clerk’s office, while the latter number is the current balance, which would reflect any payments that have been made as well as any accumulated penalties and interest.

Mr. Basnight insisted that the current balance is not that high, and he added that he is working with two attorneys and a company that deals with the state to expedite the matter, while he keeps at arm’s length

Mr. Basnight said that while he could not provide an exact number, he knows it’s “nowhere near” the number provided by the state.

“I’ve never, ever had a problem—a sales tax problem—and I am working as quickly and as efficiently as I can with the state to rectify it,” Mr. Basnight said. “And I began doing that at the beginning of last summer, and I will continue to do so until it’s paid off. But I know I would be shocked, so much so that I’d fall out of my chair, if it’s anywhere near that number. That was the original number, and huge payments have been made all last summer and up to the point of closing this past season for the season, and they will resume again immediately upon opening.”

Mr. Gazzale said he could not comment on whether payments have been made and said any department communications with a taxpayer are protected by secrecy laws. He noted that warrants are resolved on a case-by-case basis, and seizing a business is always a last resort.

Little Red and Red Bar both closed for the season during the last week of September 2018, and while Red Bar has historically closed for a few months each winter, the move was a first for Little Red. Mr. Basnight said at the time that he needed a break after two decades in the restaurant business and that it made sense to close up for the season at a time of year when business slows.

“It was just a very rough year in the restaurant business after 24 years,” Mr. Basnight said.

Red Bar first opened in 1998 on Hampton Road, and sister restaurant Little Red opened in 2011 on Jobs Lane in a space that formerly housed Featherstones and Buckley’s Irish Pub before that.

Mr. Basnight previously co-owned both restaurants with fellow restaurateur David Loewenberg. They parted in 2015, with Mr. Basnight buying out Mr. Loewenberg’s stakes in Red Bar and Little Red and the land they sit on.

Mr. Basnight and Mr. Loewenberg have been embroiled in a lawsuit since 2017 over the terms of the contract in which Mr. Basnight agreed to purchase Mr. Loewenberg’s half of Little Red and Red Bar for $1.1 million, with $515,000 paid up front and the remaining $585,000 paid off in annual installments every April 1 from 2016 to 2018. Mr. Loewenberg sued Mr. Basnight in August 2017 for $426,369, plus interest, costs and attorneys’ fees.

In an affidavit, Mr. Loewenberg said Mr. Basnight failed to make the second annual payment by the deadline and still had not paid after the grace period expired and a notice of default was issued.

Mr. Loewenberg did not reply to requests for comment on Tuesday.

In an October 2017 affidavit, Mr. Basnight countered that Mr. Loewenberg had violated terms of the contract that prohibited both men from hiring away key employees from each other’s restaurants. Mr. Basnight said a manager/front door host quit working for him in March 2016 and immediately went to work for Mr. Loewenberg’s Sag Harbor restaurant The Bell & Anchor. Then, on the eve of Memorial Day weekend that year, head chef Erik Nodeland quit his job at Little Red and was later spotted at The Bell & Anchor as well as Mr. Loewenberg’s other restaurants, Beacon in Sag Harbor and Fresno in East Hampton.

In a memorandum of law, Mr. Loewenberg’s attorneys with Manhattan law firm Pryor Cashman LLP replied that the woman identified as a “manager/front door host” by Mr. Basnight was, in reality, just a hostess—not a manager. And because she was never a manager, she was not subject to the nonsolicitation provision of the contract, the memorandum asserted.

Mr. Nodeland stated in an affidavit that his decision to leave as head chef of Red Bar was not at Mr. Loewenberg’s urging and he did not go to work or have an agreement to go to work for Mr. Loewenberg. He said he only visited Mr. Loewenberg’s restaurants as a patron.

Mr. Basnight’s counterclaim accuses Mr. Loewenberg of badmouthing him to vendors and members of the community, making it difficult for him to be extended credit or to retain staff. Mr. Loewenberg denied the allegations.

Mr. Basnight said he could not publicly discuss the lawsuit but stood by the allegations he made in court filings. He added that defending himself in court has been costly but he believes it is worth fighting for the truth.

“It’s a hard business, and I try to tell everybody—and I mean this—that in the restaurant world to have a partnership, a business partnership, that runs 18 years is next to a miracle,” Mr. Basnight said “It took about a year to be able to say this. I truly only wish [Mr. Loewenberg] the very best.”

Mr. Basnight and Mr. Loewenberg are slated to return to State Supreme Court in Riverhead on May 7 for a conference.

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