Updated: Lawsuits allege kitchen equipment theft, fraud by downtown developer Sudha Tokala
Note: The story has been updated with comments from Sudha Tokala.
The developer of Wichita’s new downtown medical and culinary school complex is being sued by an auction firm that claims she bought tens of thousands of dollars worth of commercial kitchen equipment and didn’t pay for it.
The lawsuit filed last month by R.L. Rasmus Auctioneers names Sudha Tokala and her company, Douglas Market Development LLC, as defendants.
The suit alleges that Tokala bought $45,000 worth of commercial grade cooking appliances in an online auction in March of last year, took possession of the equipment later that month, and then had the charge to her Visa credit card reversed.
“Ms. Tokala’s and Douglas Market’s theft of the Auction Items was willful and wanton in nature because there was no basis to effectuate these credit card chargebacks, and she made no efforts to return the Auction Items subsequent to taking possession,” the suit alleges. “On information and belief, Douglas Market knowingly accepted the benefit of the auction items and continues to use such in furtherance of its real estate development business.”
Tokala, whose project will have several commercial and demonstration kitchens, said she’s not responsible for the charges and doesn’t have the equipment.
“Somebody took my identity and did that,” she said. “Our attorneys are dealing with it. We never picked up anything from them.”
The equipment in dispute came from two bankruptcy-court-ordered auctions of furniture and fixtures from Leon Cafes in the Washington D.C. area, according to the now-expired auction listings.
The British chain of fast-food, health-food restaurants entered the U.S. market in 2018 but was hit hard by COVID-19 business restrictions and permanently closed its first three U.S. locations in February 2021.
About 40 items were liquidated in the online auctions and Tokala cast the winning bids on eight of them, the lawsuit said.
The suit is seeking repayment of the $45,080.46 the auction firm says Tokala owes, plus unspecified attorney’s fees and damages.
Tokala started her downtown projects in 2017 when she bought the former Finney State Office Building at 230 E. William from the city of Wichita for $710,000 in a sealed-bid auction.
The building once housed almost all state operations in Wichita, but went on the market after then-Gov. Sam Brownback abandoned it in favor of leasing office space from private-sector landlords around the city.
It’s being redeveloped as the home of the nonprofit Kansas Health Science Center and its Kansas College of Osteopathic Medicine. The medical school is scheduled to welcome its first class of 85 students in August.
Since starting the project, Tokala’s added three more buildings:
▪ Sutton Place, at 209 E. William, which she is redeveloping into student housing for the medical students.
▪ The former Henry’s Department Store building at 124 S. Broadway, where she’s building a culinary school that will be operated by Wichita State University Tech. The cooking school will feature teaching and commercial kitchens, a dining hall at least one student-run cafe and a rooftop event center.
▪ A fourth building in the project is planned for a 119-room Marriott AC boutique hotel at the former Broadway Plaza Building on the southwest corner of Douglas and Broadway.
The downtown education complex has been heavily subsidized by the city of Wichita using nearly every economic development incentive in the city’s toolbox.
The City Council has approved more than $47 million in city incentives for the projects:
▪ Industrial Revenue Bonds — $30.7 million ($26.7 million in property tax abatement and $4 million in sales tax abatement)
▪ Community Improvement District — $3.2 million in added sales tax dollars back to the developer
▪ Tax Increment Financing — $1.3 million in property tax used to convert Chester I. Lewis Park, a city-owned park, into an entryway for the medical school
▪ Special assessments — $12 million for facade improvements and asbestos remediation paid back through special assessments (over $11 million in facade improvements and just under $1 million in asbestos remediation)
▪ 500 parking stalls and an option to buy a city-owned parking lot after the DO school opens in August
Insurance lawsuit
The lawsuit over high-end kitchen equipment isn’t the only legal dispute related to Tokala’s downtown project.
The Finney State Office Building stands at the center of a separate and ongoing civil dispute in Sedgwick County Court. At issue is whether Tokala could be awarded insurance money based on damage to the inside of the building, which had sat vacant since 2015.
Tokala filed a lawsuit against Great Lakes Insurance in 2019 after the insurance company blocked her attempt to cash-in on a $3 million insurance policy that had been taken out on the building in 2017 by Old Town developer David Burk’s Marketplace Properties LLC, which never actually owned the building.
According to court documents filed in that case, Tokala bought the building from the city through an LLC called Spartan Downtown and then transfer ownership to Innes Block LLC, “joining forces” with a group of investors that included Burk.
State business filings show Jerry Jones, Dave Wells, Dave Murfin, Nestor Weigand, Ivan Crossland, Steve Barrett and Pat Do were also listed as partial owners of Innes Block when Tokala transferred ownership of the building. They later transferred their ownership stakes to Spartan Downtown, owned by Tokala.
Tokala told The Eagle that the policy should have been with Innes Block, not Burk’s Marketplace Properties LLC. She said Burk asked IMA, Inc., who filed paperwork with Great Lakes, to add Innes Block to the policy but IMA listed only Marketplace Properties on the application.
“Nowhere have I signed any of these documents that went to these insurances that went from Dave Burk to IMA,” Tokala said. “Dave Burk just sent me an email saying the building has been insured, to all the partners saying the building has been insured, so then when I went to file a claim for the damage, that’s when the lawsuit happened.”
Great Lakes said in court documents that Tokala and Burk made misrepresentations and concealed facts to make an insurance claim on the former state office building. Tokala claims that her company should have been covered by Burk’s 2017 policy.
The policy wasn’t put under her company’s name “as a result of an innocent, mutual mistake” between the insurance company and Burk, who court records say was a manager of Innes Block LLC and his own Marketplace Properties.
Great Lakes also claimed Tokala “committed fraud” when she applied for an insurance policy on the building in 2018 as Innes Block.
In the application, filed May 1, 2018, Great Lakes claims she stated there was no damage to the building, that Wichita police conducted regular security checks on the building and that a general contractor was performing renovations, “when in fact it had no such general contractor performing any renovations” at the time. Tokala disputes all of those claims and said she did not commit fraud.
Two weeks before her 2018 application, Tokala had reported to Wichita police that the building had suffered $1.5 million in damage from trespassers, a Great Lakes countersuit alleges.
Tokala said Great Lakes should have been aware of the damage because Innes Block gave notice to Great Lakes after she filed the police report.
Great Lakes said Tokala claimed the building had been vacant since 2017, when in fact it had been abandoned since 2015.
Tokala, in court documents, said she or Burk requested Innes Block be added to the policy in 2017. She said IMA made a mistake by not adding Innes Block to the policy and Great Lakes made a mistake by not checking the deed of the property to see who the actual owner was.
“Either IMA will fess up to it and say, ‘We made a mistake,’ and pay me, or Great Lakes will pay me, but there’s no fraud there,” she said in a phone interview.
A bench trial to decide whether Tokala’s company should be added to the 2017 policy is scheduled for June 27.
Carrie Rengers of The Eagle contributed to this report.
Correction: A previous version of this article misstated Dave Burk’s ownership interest in Innes Block.
This story was originally published March 13, 2022 at 4:37 AM.
