Police in eastern Tennessee arrested Sarma Melngailis, the owner of the ballyhooed raw vegan restaurant Pure Food and Wine, and her husband, Anthony Strangis, on grand larceny, fraud, wage theft, and tax fraud charges on Wednesday afternoon. Melngailis has been on the run from creditors and her former employees since last July, when workers say she failed to pay them for as long as two weeks and paychecks began to bounce. Her disappearance forced the Gramercy Park eatery to close down along with her mail-order snack business and juice bar One Lucky Duck.
Police reportedly caught up to Melngailis and Strangis in the town of Sevierville, Tenneesse when Sevierville police say the pair ordered delivery to their hotel room, specifically the decidedly not-raw, and possibly not-vegan meal of pizza from Domino's. Brooklyn prosecutors tipped Sevierville police off around 3 p.m. yesterday, and the couple is being held in local custody awaiting extradition, according to Sevierville's Detective Kevin Bush. Prosecutors unsealed a 24-count indictment against the couple today, charging them with stealing $844,000 from four investors, stealing $40,000 in wages, and failing to pay more than $400,000 in sales taxes.
The authorities claim that Melngailis and Strangis spent $2 million at casinos, and on watches and high-end travel, driving the businesses into the ground before going on the lam.
In a statement, Brooklyn DA Ken 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.
Brooklyn prosecutors were able to take the case because One Lucky Duck has an office address in Bedford-Stuyvesant.
Melngailis opened Pure Food and Wine in 2004 and its high-end raw vegan offerings attracted a following, including among celebrities such as Alec Baldwin, who met his second wife Hilaria there. In 2013, prosecutors say, Melngailis brought on Strangis as a manager, but introduced him to workers under the name Shane Fox.
From January 2014 to January 2015, Melngailis allegedly transferred $1.6 million in business money to her own bank account, and Strangis allegedly blew $1 million of it at Foxwoods Resort Casino, another $200,000 at Mohegan Sun Resort Casino, $80,000 at high-end watch stores, and $70,000 at hotels in Europe in New York.
Strangis seems to have had past problems that resulted from his gambling. In 2014, Connecticut's The Day reported that he was arrested for violating probation at Foxwoods after winning two jackpots worth $164,000. He was reportedly on probation for a grand larceny conviction out of Florida. Then and now, the authorities listed his address as Fairhaven, Massachusetts.
The restaurant shuttered back in January 2015 after workers walked out, saying they had not been paid, some for as long as a month. According to the indictment, Melngailis had trouble making payroll five times in 2014. She reopened months later, telling a bartender she had $1 million in new investments, and hired a general manager to rehabilitate the finances.
The bit about the investors was basically true: according to the indictment, she drummed up $844,000 from high-rolling former patrons by falsely telling them that she had taken money out of the business in 2014 to help her mother. She also allegedly lied and told them a rich man named Michael Caledonia was poised to buy the business, and arranged for them to meet him. Caledonia turned out to be Strangis, prosecutors say.
Writing in blog posts last March to explain her absence and seek new investors, Melngailis said, "the restaurant, and I are hanging from a cliff" and ascribed the collapse to "a really truly awful 2014 on a personal level."
In the posts, she pledged to "make it up to" angry employees and [take] care of them "as long as I'm here and alive." She said she dreamed of one day transferring ownership over to the employees, retaining only creative control, but that her task at that moment was "to steer the Titanic away from the iceberg."
"My biggest fear in life is letting people down. Always has been," she wrote. "And in some insane way, I managed to create a situation where I did just that on a massive scale."
Prosecutors allege that by June 2015, when checks began bouncing or being withheld again, Melngailis had transferred another $400,000 out of the company, including $300,000 that went to Foxwoods for her husband's tab, $25,000 more charged at Connecticut casinos, and more than $100,000 in cash withdrawals. When she vanished, Melgnailis allegedly owed 84 workers a total of $40,000, and had failed to pay $410,000 in sales taxes.
After Melngailis went on the run, prosecutors say they tracked her to Las Vegas, Louisiana, and Tennessee. Seierville is 10 minutes from Dollywood, a shrine to all things Dolly Parton, and an hour and a half from a Harrah's Cherokee Casino Resort in North Carolina.
Ben Dictor, a labor lawyer at Eisner & Associates, helped Pure Food workers unionize and sue Melngailis when it became apparent she wouldn't pay them.
"My first reaction is that it looks like this is the beginning of Sarma being brought to justice, which is a good thing," Dictor said. He added that he appreciated prosecutors taking the case seriously, saying, "This is good not just for the workers at Pure Food and Wine but for workers everywhere, to see that the state of New York is interested in protecting their rights."
Dictor said the lawsuit against Melngailis has continued in her absence. He argued that, whatever is left of her assets, bilked workers should get first dibs over investors who are also suing to be repaid.
"We hope there is money there to make [workers] whole," he said. "We think that the workers should have priority over any other debt that she may owe."
JP Ross, a juice-bar worker who came aboard in the summer of 2014, after the first payment problems, said that losing the job and about a month's pay contributed to breaking up his marriage.
"My life really got worse after that happened," he said. "It was really hard for me to make as much money as at that place again...It put a huge strain on my relationship...It was really hard to recover from that."
He said Melngailis's charm is a big part of how she was able to keep her operation going even after repeated missteps:
She had an attractive personality. She could talk the talk. The mugshot says a lot. That’s how she continued this masquerade, with that pouty face. It’s like you look at it and think, “Aw.” She was so successful at marketing, but to what end? She wins all these awards, and it all comes crashing down. It’s sad but it’s like I’m not a gambling addict, so I can’t understand it.
Ross said the Domino's detail made him think "she's a classic case con artist":
I feel like this is some kind of Netflix Original kind of thing. Bonnie and Clyde start this scam vegan restaurant that’s really successful, and then they blow it all, and they’re just driving this convertible. And then it all comes to an end and they’re doing lines of coke with Leonardo DiCaprio. It baffles me. I don’t know how they could blow that much money, especially with the way things are so expensive these days. I guess she thought she was Donald Trump or some shit.
In the months after Melngailis disappeared, former Pure Food workers organized protests and potlucks outside of the shuttered restaurant, and courted investors in an effort to reopen the place as an employee-run cooperative. Some investors were on board, but the landlord ultimately nixed the idea, the workers said. Ross said that the organizing effort shows how dedicated he and his colleagues were to the business, and how Melngailis aside, it was an important institution:
Pure was really such a special place. It was a community. It bonded us so much closer to each other. We were prepared to keep doing the work. We were doing the work when we didn’t get paid. It’s a testament to the workers' struggle. Anybody who has any kind of issues with workers rights [should take note:] we were passionate about what we were doing. We tried to save her ass, and she didn’t come clean with what she was doing.