Restaurant investor sues over lack of profit

WARREN — A retired pharmacist from California is suing the owners of Knafa, a Mediterranean and Middle Eastern restaurant in Liberty, claiming he invested more than $250,000 in the business but did not receive promised returns.

The suit was filed in the U.S. District Court Northern District of Ohio and names business owners Lena A. Esmail and her husband Mohammad Hajjawi of Hubbard as defendants, as well as Nabil A. Rahma of Youngstown, a man who helped broker the investment arrangement, according to a complaint filed with the court.

In an answer to the complaint, the couple states Issa Mitri of Morro Bay, Calif., did not receive a return on his investment, and no distributions of profit have been made to him or any other shareholders. They deny Mitri’s claim that the profitability of the business was misrepresented in order to secure his investment.

Rahma, who is representing himself, states in a motion to dismiss the case that the deal Mitri entered into states he was to be responsible for 50 percent of the restaurant’s losses, not just its profits.

Mitri invested $232,000 initially in September 2017 for 50 percent ownership, according to the court documents.

The business was established in December 2017, Rahma’s motion states, and there was a likelihood of delayed profits and early losses. The parties agreed to share an equal cost for the losses, the motion states.

Mitri also promised to back up the cost of the lease because business revenues may not be enough to cover the cost, Rahma’s motion states.

Rahma states Mitri entered the contract at “his own risk” and he made no guarantee of profitability to Mitri.

Mitri’s complaint states he gave more cash over time, adding up to $256,906, and is seeking the principal amount, plus interest, punitive damages and reasonable attorney fees.

The complaint states the defendants did not properly manage the business, used corporate assets for personal purposes and didn’t disburse profits.

He admits in the complaint that he was never provided a prospectus, revenue projections, an outline of risks and other information before investing the money. He states the business was supposed to pay him a monthly return.

The defendants deny the allegations.

And, Rahma denies Mitri’s claim that Rahma misrepresented details of the deal when he entered the agreement.