Bar owner claims she’s being punished by the state for husband’s actions

By: - February 25, 2022 11:47 am

(Photo by Getty Images)

The owner of a West Des Moines nightclub is taking the city and state to court over the loss of her liquor license, arguing she is unfairly being held responsible her husband’s actions.

The city of West Des Moines first denied a liquor license for the Xcaret Club and Lounge in 2018, citing the criminal history of then-owner Jorge Sanchez, who had previously been charged on three occasions with serving alcohol after hours. Within days of that denial, Sanchez transferred ownership of the bar to his wife, Maria Mendoza, who applied for a license.

Court records show that at the time, council members expressed skepticism about the arrangement, but Mendoza assured the city she would be the sole person managing the club and handling its finances, although her husband would arrange for entertainment at the club.

The city approved the license application and renewed it a year later, in 2019. But it 2020, the city denied the owner’s application for renewal, citing the recent arrest of both Sanchez and Mendoza. The two had each been charged with five counts of sales tax evasion and, in addition, Sanchez was charged with fraudulent practices.

Prosecutors alleged the couple paid no sales taxes and received no tax withholding permits from late 2018 through 2019. During that time, the club allegedly generated more than $335,000 in unreported income, resulting in tax liabilities of more than $39,000.

The state’s Alcoholic Beverage Division, meanwhile, determined in August 2020 the club had violated emergency public-health orders related to the COVID-19 pandemic and fined the establishment $1,000. Three months later, the ABD again determined the bar was operating in violation of pandemic-related restrictions.

After the city denied the club’s application for a license renewal, Mendoza appealed and the case went before Administrative Law Judge Thomas Augustine, who ruled against her last August.

Augustine noted that Mendoza claimed most of the allegations against her were the result of misunderstandings that stem from her status as a first-time business owner and the fact that English is not her native language.

“While there is some empathy for Mendoza’s circumstances,” Augustine ruled, “Xcaret cannot be permitted to escape responsibility for the license application’s contents or violations of the law simply by claiming ignorance. It was Mendoza’s responsibility to ensure accurate information was provided, all taxes were paid, income reported properly, and all laws and regulations followed.”

He added that “the combination of so many violations makes it harder to believe that these were just simple mistakes.”

One day after Augustine issued his ruling, Mendoza and Sanchez agreed to plea bargains in the pending criminal cases. They each pled guilty to a single count of fraudulent practices, an aggravated misdemeanor, in exchange for all counts of tax evasion being dismissed. They each were fined $650.

Mendoza is now taking the city and the ABD to court, seeking judicial review of the decision to deny the Xcaret Club and Lounge a license.

“Clearly, in its denial, the city of West Des Moines was improperly holding Ms. Mendoza accountable for the actions of her husband,” Mendoza’s attorney, Billy J. Mallory, argues in court filings, adding that at the time of the city’s decision, Mendoza had no criminal history.

With regard to the tax issues, Mallory states that Mendoza is “working with the Iowa Department of Revenue and her CPA to prepare a master accounting to determine sales tax amounts which must be repaid” and that she is “working toward correcting this oversight in good faith.”

As to whether Sanchez’s involvement with the club was truly limited to arranging for entertainment, Mallory argues that “because Xcaret was a nightclub, everything inside those four walls involved entertainment.”

The city and the state have yet to file a response to the petition.

Our stories may be republished online or in print under Creative Commons license CC BY-NC-ND 4.0. We ask that you edit only for style or to shorten, provide proper attribution and link to our web site. Please see our republishing guidelines for use of photos and graphics.

Clark Kauffman
Clark Kauffman

Deputy Editor Clark Kauffman has worked during the past 30 years as both an investigative reporter and editorial writer at two of Iowa’s largest newspapers, the Des Moines Register and the Quad-City Times. He has won numerous state and national awards for reporting and editorial writing. His 2004 series on prosecutorial misconduct in Iowa was named a finalist for the Pulitzer Prize for Investigative Reporting. From October 2018 through November 2019, Kauffman was an assistant ombudsman for the Iowa Office of Ombudsman, an agency that investigates citizens’ complaints of wrongdoing within state and local government agencies.