Friday, December 28, 2018

He blew the whistle on Newport News/Williamsburg International Airport scandal — and says it could cost him his business

Tom McDermott, who owns Crabtown Raw Bar and Grill in Hampton, also ran restaurant and food services at the Newport News airport from 2003 to 2017.

Tom McDermott lost his restaurant at the Newport News/Williamsburg International Airport in late 2016, kicking off more than two years of legal wrangling.

Now he’s on the verge of losing his other restaurant, too — and he blames the hundreds of thousands of dollars in legal fees he’s spent fighting the airport.

McDermott has owned Crabtown Raw Bar & Grill, on East Pembroke Avenue in Hampton, since 2015.

But the city shut Crabtown down on October 30th — changing the locks on the doors — because of the restaurant’s failure to pay meal taxes going back more than six months, Hampton Commissioner of the Revenue Ross Mugler said.

He declined to say how much was owed, saying he’s precluded from doing so by law. “But we don’t close doors for nothing,” Mugler said.

McDermott says he couldn’t make ends meet with huge legal bills stemming from his dispute with the airport, on top of several lines of credit he had for his two restaurants — only one of which was still bringing in money.

“This is the result of two years of this nonsense,” McDermott said. “We tried as best we could to continue to make payments, but I couldn’t do it.”

McDermott, 55, of Hampton, said he’s since paid back much of the overdue meal tax, and will soon pay the rest. But he’s now planning to sell Crabtown, saying his treatment from the airport’s board has left a sour taste in his mouth.

“I had a relationship with the airport for almost 30 years,” he said. “The board allowing me to get screwed like this — it’s inconceivable. This stupid thing has destroyed me.”

McDermott’s company, New Dominion Clubs, began providing food and beverage services at the airport in 2003, when it renovated a dilapidated Burger King and turned it into the Blue Sky Cafe. The company later added bar and kiosk areas on the concourses, and McDermott said airport officials always pushed those expansions.

McDermott said he regularly charged reduced rates for airport and city events, and local charitable functions, saying he regularly sold the food at cost for airport events and covered the labor.

But in late 2016, the Peninsula Airport Commission voted to unilaterally end his long-term lease and kick him out. The airport filed for a court judgement, saying it needed the space “for an airport purpose” — running its own restaurant.

As the lease dispute was heating up, McDermott exposed a $5 million loan guarantee that the Airport Commission had secretly given to a startup airline, People Express Airlines, in 2014.

McDermott, who believes his knowledge of that loan is the real reason he was forced out, filed an open records request for loan documents in late 2016.

That led the Daily Press to press for answers about the loan guarantee in early 2017, leading to the revelation that the airport spent $4.5 million in public money to pay off the loan when People Express collapsed only months later.

A judge ruled in early 2017 that the airport was within its rights to terminate McDermott’s lease. But the judge also said the 2010 lease requires the airport to reimburse the company for its capital investments, minus depreciation.

Two years on, that amount is still a matter of hot dispute.

McDermott says he pumped more than $1.5 million into the airport over the years, including on restaurant fixtures, kiosks, and water and electrical lines. He says the airport owes him $815,000.

But the airport’s attorney, James S. McNider III, has said in court hearings that New Dominion is owed little or nothing at all.

McNider says the company hasn’t provided adequate justification — such as tax returns, invoices and canceled checks — to back his $815,000 claim. The attorney also contends the company didn’t follow accounting rules on depreciation.

McDermott, for his part, said the airport threw away “boxes and boxes” of his business files — including documents needed for his claim — in September 2016.

A trial is scheduled for February.

McDermott said he was willing to settle, but that McNider has deliberately dragged out the case with “frivolous” motions, and that the Airport Commission has not tried to push for a resolution.

McNider declined to comment on McDermott’s statements. The airport’s executive director, Mike Giardino, declined to comment, with spokeswoman Jessica Wharton saying the airport “will not discuss pending litigation.”

Airport Commission chairwoman Sharon Scott said the board has encouraged McNider to settle the case. But Scott said McNider has blamed McDermott and his attorney for the delays.

Mugler, Hampton’s commissioner of the revenue, said Crabtown owed meal taxes for April through September, with October later being added to the bill.

Restaurant diners in Hampton pay a 13 percent tax on every meal, with 7.5 percent going to the city and the rest to the state.

Mugler said the city treasurer, Molly Ward, is working with McDermott to collect the rest of the taxes he owes.

“He did a nice job renovating the restaurant,” Mugler said. “The food was good, and he had a great menu. It’s very disappointing to see the turn it has taken, because we don’t like to shut down a business.”

But Mugler said meal taxes — which are supposed to be turned over to the city monthly — don’t belong to a restaurant owner.

“You can’t use taxpayer money for your legal bills,” he said.

McDermott said the balance will be paid off in a matter of days. Still, he’s strongly considering moving out of Hampton Roads because of everything that’s happened.

“I am going to need to recharge my batteries,” he said. “This has just been brutal.”

Original article can be found here ➤


  1. Going into business with a municipality or other beaurcray has its risks. As time goes by the staff your dealing with changes, along with their expectations. Most of these entities are revenue hungry , overstaffed, and the employees have very little practical business experience. Many of these entities take steps to make thier boards or commissions less involved in decision making, unless they need thier blessing. If you are not considered a friend or not giving them what they want, it can spell trouble.

    I made a similar mistake on a smaller scale. Purchasing a hangar and assuming and existing lease. After assuring me they would issue a newl lease in three years, the airport manager and staff changed, and the new leaders decided to take over my hangar, along with many others, and lease them back to pilots who pay their wages. After allot of fighting and unpleasantness, new leases were finally issued. But, the place has never been the same since. No more hangar improvements, no more existing hangar purchasers, no more new hangar construction. The city now wonders what is wrong. They just are puzzled. Hopefully time will heal. ButI feel for this guy!

  2. Typical government corruption. These stories are endless. And idiots vote thinking government has their best interest for them (while the fat cat gubment bureaucrats take all their spoils).

  3. Notice there is never any one losing their jobs or accountability for the government employees who mismanaged these airports, They just keep getting their paychecks while the people paying their salaries and excessive benefits suffer. The attorneys representing the government have no incentive to resolve issues. They’re goal is billable hours. Shame on the beauracracy. Better to avoid if possible and own or rent from someone accountable and with some business sense.