FOR IMMEDIATE RELEASE
Thursday, May 12, 2016
Owner of Vegan Food Business and her Husband Indicted for
Allegedly Stealing from Employees, Defrauding Investors, not Paying Taxes
Spent about $2 Million in Business Proceeds and Investments on Casinos and Luxury Items;
Failed to Pay Full Wages to 84 Workers of Pure Food & Wine and One Lucky Duck
Brooklyn District Attorney Ken Thompson today announced that a former owner of a high-end family of food companies and her husband have been arrested in Tennesse on a warrant stemming from an unsealed 24-count indictment in which they are variously charged with allegedly stealing $844,000 from four investors, shortchanging employees of more than $40,000 in wages and failing to pay over $400,000 in sales tax. The defendants instead spent about $2 million in casinos, on expensive watches and on luxury travel until their business finally closed in July 2015.
District Attorney Thompson said, “These defendants are accused of repeatedly stealing from and lying to their loyal employees and to investors who poured money into their company. They allegedly gambled away the money or spent it lavishly while leaving everyone else in the lurch. They were finally caught and we intend to now hold them accountable for this outrageous thievery and fraud.”
The District Attorney identified the defendants as Sarma Melngailis, 43, and Anthony Strangis, 35, both of East 21st Street in Manhattan, and Melngailis’s companies, including One Lucky Duck Holdings LLC, located at 630 Flushing Avenue in Bedford-Stuyvesant, Brooklyn. They were apprehended in Sevierville, Tennessee on Tuesday and are currently awaiting extradition. They will be arraigned on a later date on a 24-count indictment in which they are variously charged with second-degree grand larceny, second-degree criminal tax fraud, first-degree scheme to defraud, violation of labor law and related counts. The defendants face up to 15 years in prison if convicted of the top count with which they are charged.
The District Attorney said that Melngailis was the owner of companies that sold plant-based, raw food and other organic products. In 2004, she opened Pure Food & Wine, an upscale vegan restaurant, as well as a juice bar, in Manhattan. In 2010 she added One Lucky Duck juice bar in Manhattan and in 2012 established the One Lucky Duck raw food production center and Internet sales office in Brooklyn. She ran all the companies from 630 Flushing Avenue as one interconnected enterprise. Beginning around 2013, Melngailis’s husband, Strangis, whom she introduced to staff as “Shane Fox,” became a regular presence at the companies and exercised authority over the business, the investigation found.
From January 2014 to January 2015, according to the indictment, Melngailis transferred over $1.6 million from the business accounts to her personal bank account. Strangis spent nearly $1 million of these funds at Foxwoods Resort Casino in Connecticut, over $200,000 at the Mohegan Sun Resort Casino in Connecticut, over $80,000 at specialty watch retailers, including Rolex and Beyer, over $70,000 at hotels in Europe and New York and over $10,000 on Uber car rides. He also withdrew hundreds of thousands of dollars in cash.
During that time, Melngailis was no longer physically present at her companies, but told staff via emails she was working to grow and expand the business. She was unable to pay employees in April, May, July, August and November 2014, according to the indictment. In August 2014, Strangis (as “Shane Fox”) held a staff meeting and made numerous false statements, including a claim that he was in the process of buying the company “on paper.” In January 2015, paychecks bounced, leaving 98 workers without pay. They refused to work, despite the owner’s urgings, and the business closed.
Beginning in February 2015, Melngailis asked former patrons to invest in her company to restart the business. In the course of those discussions, she falsely stated that she had to withdraw money in 2014 to help her mother, the investigation found. Based on her representations, four people invested a total of $844,000 and she used some of this money to pay back former employees and settle other bills. In April 2015, Pure Food & Wine and One Lucky Duck’s Brooklyn location reopened.
To reassure the investors, Melngailis told them she was negotiating a sale of the entire business to a wealthy man named “Michael Caledonia.” That individual also told investors he was planning to buy them out and was going over the business finances. After meeting with “Caledonia” in May 2015, one of the investors discovered that he was actually Strangis, according to the indictment.
By June 2015, Melngailis had allegedly transferred over $400,000 from the business accounts to her personal account. She withdrew over $100,000, transferred over $300,000 to Foxwoods on behalf of her husband and charged nearly $25,000 in the Connecticut casinos, according to the investigation. When employees’ paychecks bounced again, she sent them texts and emails promising to fix everything and threatening to fire anyone who refused to work, the investigation found. In July 2015, the employees shuttered the company for good. The defendants allegedly defrauded 84 workers of up to $3,500 each for a total of over $40,000.
In addition, Melngailis and her corporations failed to remit the required sales tax to the State of New York from the beginning of 2014 through the demise of the business for a total of sales tax due of $409,987.56, according to the indictment.
The defendants left New York in the summer of 2015 and were tracked to Las Vegas, Louisiana and Tennessee.
The case was investigated by Detective Investigator Jennifer Burgos and Financial Investigator Rosa Velasquez, under the supervision of Supervising Detective Investigator Robert Addonizio and the overall supervision of Deputy Chief Edwin Murphy.
The tax crimes were investigated by Tax Auditor I Shumaila Qureshi, under the supervision of Tax Auditor III Ron Chan, both of the Criminal Investigations Division of the New York State Department of Taxation and Finance.
The case is being prosecuted by Meredith McGowan, Deputy Chief of the District Attorney’s Labor Fraud Unit and Assistant District Attorney Heidi Bausk, under the supervision of Felice Sontupe, Chief of the Frauds Bureau, and the overall supervision of Executive Assistant District Attorney William E. Schaeffer, Chief of the Investigations Division, and Patricia McNeill, Deputy Chief.