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The financial controller got the phone call just before lunch on March 1. Eight officials from the Arizona Department of Revenue had stormed Norman's Arizona at 40th Street and Campbell. They wanted access to all of the restaurant's files. But Norman Fierros, the eatery's owner, didn't know where anything was. Could the controller come in right away, Fierros pleaded, and sort everything out?
But by then, it was much too little -- and much too late. Norman's was seized by the state for non-payment of back taxes. The restaurant was sold at a government asset auction March 30, and another chapter in the long, bizarre history of chef Fierros came to an end.
So what went wrong? Businesses fail every day. The restaurant industry, in particular, is highly volatile; only 25 percent stay in business more than two years, according to Reul Couch, president of Tempe's Restaurant Brokers. Yet by all accounts, Norman's was thriving, with money flowing through its doors at twice the national average for comparable restaurant sales.
What happened to one of Phoenix's most popular restaurants, run by one of the Valley's most noted chefs, can be pieced together from state documents and financial records hastily assembled by a new controller just months before the eatery's demise.
A jumbled mess of paperwork shows that Fierros was out of fiscal control. In the final months, the scene in the restaurant was chaotic, recalls Carolyn Hoffman, a former Norman's employee. "Norman was borrowing money from employees. Some employees were collecting their wages by taking payments from his credit card machine. And our [illegal] Hispanic workers would wait half a day for payment, just to be sent home. When they did get checks, they would bounce, and the check-cashing places would call the restaurant for collection. I just stayed on because my tips came in at $600 a week."
Even as Fierros opened his new Norman's in 1998, industry watchers were keeping their fingers crossed, hoping that the highly creative, highly talented but grossly unorganized chef could pull it off. He and his partner and manager Tim Rohr were well known in the community, having opened and closed three other restaurants that, while lauded for their food, went down in dramatic fashion because of mismanagement.
This time, however, Fierros' and Rohr's business attitudes were apparently so cavalier that Rohr's complete financial statement for 2001 is a single, wrinkled sheet of paper handwritten in black marker. On it, he scratched "not cool!" next to a list of taxes owed.
According to Norman's controller -- a family member working for free but who asked that his name not be used because he's related to the Fierros family by marriage -- Rohr was managing the business by taking all the paperwork, putting it in cardboard boxes and stacking it on the patio of the central Phoenix home he shared with Fierros. Returned checks were so common -- and so disregarded by Rohr -- that piles of notices from Bank of America remain unopened. By February, Norman's had accumulated almost $19,100 in returned check fees alone.
Yet even as things broke down -- the controller says the always temperamental Fierros had taken to screaming at his staff -- help was available. The Department of Revenue had been working with Fierros and Rohr for more than a year to resolve the business's tax problems. The IRS, remarkably, was cooperating, too, having established a repayment plan requiring just $500 to $1,000 a week, according to a handwritten note from an IRS officer.
Vendors continued to give the pair credit, even as payments were never made or checks bounced. The controller had stepped in this January at Fierros' request, and within a month cleaned up several years of ravaged financial records, creating a full recovery plan. Other employees continued to work after the paychecks stopped coming, hooked on the impressive tips given by Norman's upscale crowd.
And through this, the eatery was generating some $100,000 to $120,000 a month, says the controller. According to the National Restaurant Association's latest figures, the average sales for full-service restaurants in 1998 were just over $50,000 a month.
So where did all that money go? No one knows, or else won't say. When Norman's closed, more than a dozen employees, who hadn't been paid in weeks, were still owed $16,000 in wages. A May statement shows that three dozen vendors still are owed more than $45,000, including $8,500 due to Pete's Meat & Fish Co.
Two men who privately lent Fierros money for the restaurant are seeking repayment of their $132,000 investment. The City of Phoenix is owed $7,000, the IRS $3,800. According to the Arizona Department of Revenue, Norman's owed the state $44,882, including penalties levied for bounced checks. By January, according to a note scribbled by Norman's partner and manager Tim Rohr, the debt had climbed to $55,000.
The disregard for compliance was staggering. A note dated January 31 from the IRS reminded Rohr that no unemployment Tax 940 forms were filed for 1998, 1999 or 2000. Employees claim they never got W2s, and many never even filled out employment paperwork. Workers' compensation insurance had expired. In January, the controller enrolled Fierros in a free sales tax seminar offered by the City of Phoenix, but Fierros never attended.