Recovery center must pay back start-up loans to Warren man
It seemed like a promising organization.
A group of women eager to establish an outpatient rehab and recovery center in Columbia County to serve local residents in need had everything in place — except funding.
That's when Mark Wallace, a Warren man whose daughter works in the psychology and social work field, decided he would help.
Wallace says he made a start-up, interest-free business loan to Tana Howtopat and Pam Daniel, founders of Medicine Wheel Recovery Services Inc., in November 2015 to help get their St. Helens facility off the ground.
"We [agreed upon] a $35,000 loan," Wallace says. "I had access to that kind of money so I loaned them the money. Within two months, they said 'We need more money.'"
Wallace says he expected the first round of funding wouldn't be enough to cover everything, as is the case with most start-ups, so he agreed
to another $30,000 in Jan-
His daughter, Emily Matthews, previously worked with Howtopat and Daniel at another mental health office, Wallace says, and the expectation was that she'd be hired at Medicine Wheel after the rehab center got up and running.
Medicine Wheel opened in March 2016 at an office suite off Highway 30 in St. Helens.
Matthews was hired, along with another employee, this time with a third round of funding for $18,500 from Wallace, which was earmarked for payroll.
Matthews and her coworker were both laid off within a month, according to a complaint filed in Columbia County Circuit Court by Wallace.
In all, Wallace lent the recovery center and its founders $83,500 over the course of three separate loans.
He filed a civil lawsuit against Medicine Wheel in July 2016 seeking $130,500 for breach of contract after he says Howtopat and Daniel didn't comply with repayment terms in the loan agreements, and didn't provide him access to accurate financial records.
"They still owe me a lot of money," Wallace says. "According to the financial records they submitted to me, they had the money and chose not to pay me."
According to terms in the loan agreements, Wallace was to be paid $1,000 each month, or 5 percent of the nonprofit's gross revenues, whichever was greater, but each loan agreement was drafted without the help of an attorney, Wallace says.
"As it turned out, the money from the Third Loan Agreement, which Ms. Howtopat and Ms. Daniel had represented would be used for employee compensation, had been put to other uses," the complaint states. "Ms. Howtopat and Ms. Daniel continued to refuse to provide detailed financial reports."
Wallace says he was paid in random increments, but is still owed about $69,000. He estimates he's spent about $20,000 so far on attorney fees.
Daniel and Howtopat did not respond to requests for comment on this story.
The two parties have since reached a settlement agreement and re-negotiated the repayment terms, a court document dated Nov. 6 shows. According to the revised conditions, Medicine Wheel will pay Wallace monthly for the next 30 months, until the sum of each loan is paid off.
Medicine Wheel is listed as an active nonprofit corporation with the Internal Revenue Service. The organization's webpage lists nine employees, including Howtopat and Daniel, both of whom serve as co-executive directors, in addition to a medical director, addiction program manager, veterans housing assistant and other administrative staff.
Tax filings for 2016 reflect the organization listed three employees that year — Howtopat, Daniel, and an accountant, with total income of $261,790.