Mallard's searched, but reasons not given

State investigators and law enforcement officers carried out a search warrant Tuesday morning at Mallard's restaurant on McHenry Avenue in Modesto amid unresolved issues with a closed Mallard's in Stockton.

An employee at the restaurant said officers stopped him when he came to work at 9 a.m., questioning him about Mallard's payroll and workers compensation practices, such as how he was paid and whether anyone had been injured on the job.

The employee, who did not want to give his name, said the officers were working with investigators from the state Employment Development Department, which oversees issues such as payroll taxes and workers compensation.

Patrick Joyce, an EDD spokesman, said he could not confirm whether there was an investigation of Mallard's, citing state law.

The employee said he was questioned for about two hours. He said his co-workers also were interviewed by authorities, who took files and computer equipment from the restaurant at 1700 McHenry Ave.

Mallard's, which typically opens at 11 a.m., was closed Tuesday through lunch and for most of the afternoon. The restaurant reopened in time for dinner.

The Modesto and Stockton Mallard's restaurants have been owned for two years by the Richard Sang family of Stockton. The Stockton Mallard's closed last month. The Sangs could not be reached for comment Tuesday.

Witnesses said uniformed law enforcement officers were at the Modesto restaurant Tuesday morning, along with state investigators, but it wasn't clear which agencies they were with. A Modesto police spokesman said he did not believe his department was involved in the search.

The Stockton Police Department confirmed that its officers helped carry out a search warrant at the Stockton home of Richard Sang. The warrant was from the San Joaquin County district attorney's office, which did not return calls seeking comment.

Sang owes more than $10,000 in unpaid property taxes for the Modesto Mallard's, according to the Stanislaus County tax collector and assessor's office.

The county placed a lien on the property in May, after Sang failed to pay $5,653 in 2006 taxes. Sang also failed to pay an additional county tax bill of $4,927 from August, according to the tax assessor's office.

In 1991, Sang pleaded guilty to federal charges of fraud and making false statements related to his operation of 16 restaurants in four states.

The Mallard's employee said he knew that the restaurant had problems because some of his payroll checks bounced. He said he had to cash them at liquor stores because no other businesses would take them.

Patrons turned away

Scott Pethoud of Modesto was headed for a lunch meeting Tuesday at Mallard's when a law enforcement officer met him at the door and explained that the business was closed. While he was there, Pethoud said, he saw two men taking files from the restaurant to an unmarked truck.

"We met there every Tuesday for lunch," said Pethoud, a member of a Christian-based service group. "They'd been going there for a year."

Stan Dimond, Mallard's general manager, said he could not say why the search warrant was issued or what investigators were looking for.

He did say the business is dealing with fallout from the closure of the Mallard's in Stockton.

"That was a real tough situation up there, and we're trying to keep everything afloat in Modesto," Dimond said.

Former employees of the Mallard's in Stockton said they didn't receive paychecks or unemployment from the business. A glass company put a lien against the business, and the Stockton property owner said he was owed thousands of dollars in rent, taxes and insurance.

Dimond said the Modesto restaurant would be open through at least the end of the year. "We'll still have the holiday parties," he said.

Mallard's also is the concessionaire for the Gallo Center for the Arts in downtown Modesto. The company is responsible for all refreshments served in the three lobbies and has the first shot at catering private parties. It was not clear Tuesday if that aspect of the business would be affected.

Modesto entrepreneur Dan Costa founded Mallard's, opening the restaurant in McHenry Village in 1986. He opened the Stockton restaurant in 1991.

He later sold a half-interest in the restaurants, but regained full control in 2000 before selling to the Sangs in 2005.

Costa, owners not in contact

Costa said Tuesday that he was unfamiliar with any problems at Mallard's, adding that he's had no contact with the ownership since he sold the restaurants.

"Mallard's was always a great restaurant and a great concept," he said of the Modesto operation. But he noted that before he opened, banks were reluctant to loan him money because the restaurant was so big.

"It's a big restaurant, a big machine. You have to be on your game to make it work," he said.

He added that he would not be interested in reacquiring the restaurant if it becomes available.

Costa also said Mallard's was not involved in this year's an- nual Thanksgiving dinner for the needy in Modesto. Costa works with The Salvation Army to put on the free holiday meal at Modesto Centre Plaza.

Bee staff writer Ben van der Meer can be reached at bvandermeer@modbee.com or 578-2331.