By Maria Rocha-Buschel
Police in Sevierville, Tennessee arrested former Pure Food and Wine owner Sarma Melngailis, 43, and her husband, Anthony Strangis, 35, on charges of grand larceny, wage theft, tax fraud and labor law violations on May 10. Gothamist reported that the pair was busted because of a Domino’s delivery order, a surprising meal choice for the former owner of a high-end vegan restaurant, although Melngailis has since said, in a “jailhouse interview” with the Post, that the pizza was actually for her husband.
The couple was incarcerated at Rikers Island on Wednesday, May 18 after being extradited from Tennessee. Melngailis made bail the following Tuesday on a $250,000 bond, while Strangis is still at Rikers on a $300,000 bond.
Melngailis and Strangis had been on the run since last July, when workers walked out of the restaurant on Irving Place because they hadn’t been paid for weeks, forcing the business to close for good last summer. This was following a prior closure at the beginning of last year, also due to workers reportedly not being paid.
Although Pure Food and Wine and the One Lucky Duck juice bar were located in Manhattan, the Brooklyn District Attorney is prosecuting the pair because Melngailis ran the companies from an office in Bedford-Stuyvesant as one interconnected enterprise.
The indictment from the DA’s office details an elaborate scheme allegedly perpetrated by Melngailis and Strangis, who alternatively went by Shane Fox and Michael Caledonia. According to the indictment, Melngailis made regular transfers from her business accounts to her personal accounts throughout 2014, totaling over $1.6 million and Strangis, an alleged gambling addict, reportedly spent more than $1 million from that account at the Foxwoods and Mohegan Sun casinos in Connecticut, as well as more than $80,000 in specialty stores, over $70,000 on hotels in New York and Europe and withdrew hundreds of thousands of dollars in cash.
As Shane Fox, Strangis held a meeting with restaurant employees in August 2014 after workers hadn’t been paid for a number of months that year, and reportedly said that he was buying the company from Melngailis, with the transfer of large amounts of money causing “hiccups” in payroll. But when paychecks bounced in January 2015, the frustrated workers walked out, forcing the restaurant’s first closure.
Soon after the restaurant shuttered, Melngailis began asking former patrons to invest in the restaurant and allegedly said that the business had done poorly in 2014 because she had withdrawn the money to help her mother, which the DA’s office said was untrue. Regardless, Melngailis convinced the potential investors that their concerns about the business would be addressed and a total of $844,000 was invested, which Melngailis partially used to pay back former employees, and the restaurant reopened in April 2015.
Melngailis had reportedly told one of the investors that he would be made a signatory on the business accounts and while she reneged on this promise, she did allow him viewing access to the accounts. Since she had allegedly started withdrawing funds from the business accounts into her personal accounts again, the investor questioned her personal use of the money and she reportedly said that she was negotiating a sale of the entire business to a wealthy man named Michael Caledonia. The man claiming to be Caledonia contacted another one of the investors and after meeting him in person, the investor discovered that Caledonia was actually Strangis, the indictment said.
By last June, Melngailis had allegedly withdrawn over $400,000 in corporate funds to her personal account, withdrawing $100,000 in cash and reportedly transferring over $300,000 to Foxwoods on behalf of her husband, also charging $25,000 at Foxwoods and Mohegan Sun. Paychecks again began to bounce and although Melngailis was noticeably absent from the restaurant itself, she was in contact with the managers via text message and email. She told them that she would fix everything and threatened to fire anyone who refused to work, but since the employees had no way to access accounts and no ability to pay the vendors or themselves, the restaurant was forced to close for good at the beginning of last July.
According to the DA’s office, Melngailis defrauded a total of 84 workers up to $3,500 each for a total of $40,000 and the investors lost the $844,000 they had invested in the company.
The indictment also notes that Melngailis and Strangis failed to remit $409,987.56 in sales tax due.
Town and Village originally reported on the restaurant’s two closures last January and July and prior to both closures, workers were baffled about the lack of pay because of how busy the restaurant always was.
Kevin Woods, who was a bartender at the restaurant and a representative of the union the workers formed when they started missing paychecks, told Town & Village last July that he had even spoken with an accountant who said the restaurant should have been making money and a general manager who had been hired not long before was just as confused about the missing money.
“(The manager) noticed that funds were just disappearing,” Woods said at the time. “Checks would bounce and then after a certain point he just wouldn’t write them because he knew they weren’t good.”
In the interview from Rikers with the Post on May 21, Melngailis seemed to express regret about the way her business had gone.
“It’s the worst nightmare you can think of,” Melngailis said. “If I had terminal cancer, it would be better than this, because at least (then) I did not cause it.”
The official charges on the 24-count indictment include 11 counts of grand larceny, eight counts of criminal tax fraud, three counts of scheme to defraud, a violation of labor law and a violation of general business law. The DA’s office said that Melngailis and Strangis both face 15 years in prison if convicted of the top count with which they are charged.