The Biddeford-Saco Area Economic Development Corp. says it is “taking legal action” against Harold Royals, the owner of a yet-to-open restaurant in Biddeford called Steer N Stein, for defaulting on $125,000 in business loans it issued to him in October 2015.

The development group also accuses Royals of spending loan money “on activities unrelated to the start-up of the restaurant.”

“The circumstances in this case required the EDC to seek relief from the court,” said Portland attorney Adam Shub, who represents the development group.

Royals, whose restaurant was due to open Tuesday at 140 Main St., did not respond to calls and emails seeking comment Thursday evening. A news release issued Thursday by the city of Biddeford indicates the restaurant will not open as planned.

A post by Royals on the Steer N Stein Facebook page indicates he encountered unanticipated renovation costs.

“Now that (landlord) Steve Ebling and I have had to replace all the electrical, all the light fixtures and switches, all new sub-flooring and hardwood floors, re-built store-fronts, all new sheetrock walls and insulation, all new ceilings, all new duct work, all new tile floors in the restrooms, all new finish work, all new bar, all new fire alarms, guess what? We now have to replace all the plumbing, from incoming water to outgoing sewer,” the Feb. 12 Facebook post says.

The restaurant’s Facebook page also contains public solicitations for investors, a violation of U.S. Securities and Exchange Commission rules. In addition, it contains multiple offers to sell “partner cards” at prices of either $500 or $1,000, in exchange for $625 or $1,250 worth of food and beverages at the still-unopened restaurant.

It is not the first time Royals has been connected with a failed restaurant that defaulted on a municipal loan.

In 2014, Royals’ former business partner Peter Powers was sued by the city of Gardiner for failure to repay a $40,000 loan issued by the city for a different restaurant they owned together. That restaurant, called Alex Parker’s Steak House, opened in December 2012 and shut down in November 2014.

Biddeford-Saco Area Economic Development Corp. attorney Shub, of the Preti Flaherty law firm, did not directly answer the question of whether the Economic Development Corp. had been aware of the 2014 default when it loaned Royals $125,000 in 2015.

In an emailed response, Shub referred to the fact that Royals was not the named applicant on the Gardiner loan.

“All three loans were issued on October 9, 2015 to finance the start-up of the restaurant. The EDC issued the loans,” he wrote. “Mr. Royals did not default on a loan in connection with Gardiner.”

Shaub did not respond to a follow-up question asking whether Royals’ role as business partner in the closed Gardiner restaurant was considered germane to the loan issuer’s due diligence process.

Biddeford Mayor Alan Casavant said city officials were not directly involved in issuing the Steer N Stein loan. Biddeford has an agreement with the development group to underwrite and service its loan programs, he said.

“They independently evaluate loan applications, so I do not know the particulars of why this loan was approved, nor was my staff involved in that loan approval,” Casavant said.

The Biddeford-Saco Area Economic Development Corp. is a nonprofit partnership established in 1992 by the cities of Biddeford and Saco and the Biddeford-Saco Chamber of Commerce and Industry. Its mission is “to promote the sustainable, long term economic prosperity of the Biddeford Saco area,” according to its website.

Since its inception, it has made 124 loans to 73 businesses totaling over $7 million. Those loans have stimulated an additional $35 million of investment and created and retained almost 900 jobs in Biddeford, according to Thursday’s news release.

This story was updated at 9:00 a.m. February 26, 2016  to correct the spelling of the name of the Portland attorney representing the development group.

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