Redstone owner sued over unpaid bank loans

Glen Stubbe, Dml - Star Tribune Star Tribune

The Redstone restaurant on Ridgedale Drive in Minnetonka.

A lender claims that Tom Petters' associate Dean Vlahos defaulted last autumn on repayments toward $5.5 million.

By ROCHELLE OLSON, Star Tribune

Last update: February 18, 2009 - 10:12 PM

In another sign of mounting trouble for Redstone American Grill owner Dean Vlahos, two lawsuits filed Wednesday allege that the close associate of jailed businessman Tom Petters defaulted on two business loans last fall worth more than $5.5 million.

Signature Bank of Minnetonka filed the suits in Hennepin County District Court, indicating that Vlahos' business as well as his personal finances are in trouble. The lawsuits do not specify which business benefitted from the loans.

One loan was for $4 million and the other was for $1.5 million, according to the suits. The bank is also seeking interest and attorneys fees from Vlahos.

Vlahos provided a written statement through a public-relations firm calling himself a "victim personally and financially" of Petters.

Petters was arrested Oct. 3 at his Wayzata home and was later charged in federal court with conspiracy, fraud and money laundering in what authorities have described as a $3.5 billion Ponzi scheme. He has maintained his innocence and is scheduled for trial in June. Vlahos and his estranged wife, Michelle, are among Petters' creditors with claims of about $16 million.

"I will rebuild," Vlahos said in his statement. "The ongoing and unwarranted coverage of my personal life is only more hurtful to my friends and family, many of whom are also victims in the Petters and [Bernard] Madoff cases. Redstone is a great restaurant and a successful concept. It will continue to grow, and is not impacted by my personal challenges."

In actions last month, Home Federal Savings Bank of Rochester moved to foreclose on the lakeside Deephaven mansion owned by the Vlahoses. The Rochester bank claims they owe $11.5 million. That bank also is suing Vlahos for unsecured loans of $500,000 in 2003 and $1 million in 2007. Vlahos is trying to sell his Deephaven home, plus two homes in Florida, for $33.6 million.

In the newest action, Signature Bank said Vlahos executed a $4 million promissory note for a business loan on Jan. 29, 2008. By Oct. 6, he was in breach of contract despite a one-month extension on the due date, failing to make required interest payments and to pay outstanding principal, the lawsuit said.

The bank's other lawsuit said that in September 2007, Vlahos executed a promissory note for a $1.5 million revolving line of credit business loan. As of Sept. 5, 2008, he was in default, the lawsuit said.

The Vlahoses were close friends and associates of Petters, who remains jailed despite repeated attempts to be freed on bail pending trial. To date, four of his associates have pleaded guilty to related charges, and his accountant pleaded guilty to tax charges.

Vlahos made his name and fortune founding sports bar Champps in the 1990s. He had hoped to grow the Redstone chain nationally, but the economy and Petters' trouble derailed that plan.

Late last year, Vlahos sought to reassure Redstone's 80-some shareholders that Petters' ownership wouldn't trouble its operations.

"Mr. Petters has never had any involvement in the affairs of Redstone other than that of a shareholder," Vlahos said in a Nov. 20 letter to shareholders obtained by the Star Tribune last year.

Rochelle Olson • 612-673-1747

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