Restaurant owner faces tax scrutiny

The Washington Attorney General’s office has accused the owner of a favorite Spokane breakfast spot of being a tax cheat who uses bankruptcy law to avoid paying his fair share.

For at least the fifth time in 13 years, an Old European waffle house restaurant has filed for bankruptcy protection. The filings have used different corporate entities, but all have listed Rick Pedersen as the owner.

There currently are Old European restaurants in Spokane, Spokane Valley, Post Falls and Pullman, packed with diners ordering from a novel morning menu.

The latest case, filed last month, involves the Old European Breakfast House on East Sprague. In court documents signed by Pedersen, the business is listed as having assets of $8,900 and debts totaling $225,000.

The case has drawn the ire of the Washington Attorney General’s bankruptcy and collections unit.

Assistant Attorney General Zachary Mosner referred to Pedersen in one court brief as a serial bankruptcy filer who has used the system to avoid paying taxes.

“The underlying theme in the cases seems to be the failure, unwillingness and/or inability to pay state and federal taxes,” Mosner wrote in the brief. He urged U.S. Bankruptcy Court Judge Patricia Williams to dismiss the latest bankruptcy case and bar Pedersen from taking any business into bankruptcy for five years without first obtaining permission.

“Enough waffling,” Mosner wrote. “It is time to stop the tax abuse and the abusive filing.”

According to court records, Pedersen has declared personal bankruptcy at least twice, once in 1987 and again in 1999. He did not return multiple phone messages left with employees at the Old European Breakfast House on East Sprague. His home telephone number is unlisted and telephone calls to another restaurant he reportedly owns, Liberty Lake-based Sunset in Tuscany, went unanswered.

In the most recent bankruptcy filing, Old European listed debts of $90,000 in state taxes and $47,000 in federal taxes. Spokane County also is owed more than $21,500.

Pedersen said in the bankruptcy filing that he works more than 50 hours a week and is owed back wages from his business totaling $22,000. His wife, Shelley Pedersen, is owed $10,000.

Other debts include $3,000 to Spokane landlord Reugh/Douglass Partnership, and $31,260 to a Georgia lender called Advance Me Inc. that provides cash advances for a percentage of future credit card purchases.

Pedersen’s attorney, Dan O’Rourke, called the restaurant business a difficult financial endeavor that runs on thin margins. From what he has been told by Pedersen, he said, it appeared unfair of Mosner to couple the individual restaurant bankruptcies and blame it all on common owner Pedersen, who ran each of the businesses as a separate entity. The newest filing is a Chapter 11, which businesses can use to halt collection efforts and reorganize.

A plan detailing how the business would run once cleared by the bankruptcy filings has not been filed, O’Rourke said.