Salem city officials for a year endured unpaid rent and fees that climbed above $100,000 before abruptly shutting down Rudy’s Steakhouse in April, according to an investigation by Salem Reporter.

Records show that while the popular restaurant served steaks and seafood downtown, its owner was regularly working to avoid closure.

In the end, Robert Kunke’s business was deep in debt to the city, state taxing agencies and lenders.

City officials kept granting Kunke extensions to pay what he owed and at one point offered to set aside thousands in fees the restaurant owed if it paid past rent, the investigation found.

Top officials, including Mayor Julie Hoy, met with Kunke in a last-ditch effort to reopen the restaurant. With lawyers at his side, Kunke requested the city give Rudy’s another chance with a new plan. It went nowhere. 

Hoy and Kunke won’t talk about it, but whatever happened behind those closed doors hasn’t saved Rudy’s. The restaurant stands locked, cloth napkins still sitting, tented on linen tablecloths for diners who will never come.

The restaurant’s financial struggles go back years, records show. The business and its owner, Kunke, at one time owed the city and state $243,690 in rent, taxes and fees.

Records show that as Rudy’s lapsed on rent, city officials allowed Kunke and Rudy’s executive director Tailor Stewart to make late payments despite the city’s legal right to end the business’ leases.

Officials repeatedly warned Kunke and Stewart they would close Rudy’s if rent was not paid, according to default notices. Until the end, the city gave extensions so the restaurant could pay rent late, at times by weeks or months.

The city is considering its options on whether to take legal action to recover money still owed by Rudy’s, Kristin Retherford, city director of Community Planning and Development, told Salem Reporter.

Alongside city issues, Rudy’s owes the state Employment Department and the Revenue Department for unpaid taxes that date back two years, Marion County records show.

The financial situation became increasingly messy earlier this year with bounced checks, accounts of a card-swallowing ATM machine and one bank closing the restaurant’s accounts.

The abruptness of the closure on April 15 caught the community by surprise.

Employees went online to complain about unpaid wages. Customers claimed they recently bought gift cards that appeared to be of no value. A local smokehouse quickly stepped in to offer Rudy’s customers a 50% redemption of their gift cards.

The restaurant, at 350 Chemeketa St. N.E., was part of Salem’s downtown business community for about eight years. Records show that Kunke’s company leased space for a butcher shop, banquet hall, pub and the restaurant.

Over its years downtown, Rudy’s established itself as a high-end restaurant that was popular for special occasions like anniversaries, date nights, holidays and birthdays. The restaurant hosted happy hours in a fine dining environment that was well-rated by diners.

Salem Reporter’s investigation is based on records obtained from the city through public records requests, documents from the Marion County recorder’s office and official statements.

Kunke did not respond to emailed questions or provide payment records despite offering to do so. Kunke also didn’t respond to excerpts of this report to review for accuracy ahead of publication. They were also sent to his attorneys.

A year of buildup

Rudy’s started 2024 current on all of its rent, according to Retherford.

That may have been because the restaurant business and its owner turned to a costly source of financing. New York court records show that in January 2024, the restaurant executed an agreement with a company called NewCo Capital Group.

In essence, Rudy’s got a cash advance against its future earnings.

Such financing “is not a traditional loan but rather an advance on future sales. It involves a lump sum payment to a business in exchange for a percentage of its daily credit card and debit card sales,” the company explains online.

NewCo says that the cost is “typically higher than the interest rates on traditional loans” and urges potential borrowers to “ensure that the benefits outweigh the expense.”

Later, it would turn out, Rudy’s got advances totaling several hundred thousand dollars.

Throughout the year, Rudy’s pledged its assets to other companies providing similar services, state filings show.

But even with the expensive help, the restaurant was behind on its lease payments by the summer of 2024.

It was not the first time Rudy’s fell behind. In 2021, the restaurant owed $139,895 to the city for missing 11 months of rent, emails show.

It paid back the debt over 2021 and continued to keep up with payments until 2024, according to city officials.

Rudy’s made on-time lease payments in January and February last year but city records show no rent payments in March, April, May and June for its restaurant and banquet spaces.

In June, the financial stress became more evident. Marion County filed a lien against Rudy’s for $2,939 in unpaid property taxes, according to county records. The lien said that Rudy’s could owe more in unpaid taxes for other years.

By July, Rudy’s owed the city $51,769 for unpaid rent at the restaurant and pub spaces, emails show. City payment records, though, showed that restaurant and banquet rent went unpaid for months while the pub kept up its payments.

Salvador Diaz, a city real property services specialist, wrote Kunke in May and then again in July about the past-due rent.

On July 9, Kunke asked Diaz and other city staff to “not put me out of business.”

He listed personal and professional reasons the business was behind on payments.

He said Rudy’s sales had dropped 10% “year over year” and that food and labor costs increased during the same time. Kunke also said that the time of year, around the Fourth of July, was the “slowest time of the year.”

He had other explanations.

He said in an email that he had to pay $200,000 to a business partner who loaned him the money to help Rudy’s during the Covid pandemic.

He also said he was expecting to get a $500,000 check from the federal government, payment he said was for retaining employees during the pandemic. It hadn’t arrived as expected, he told city officials.

He made what appears to be a reference to the financing that he had arranged. He referenced several “deals” that were costing him $65,000 every week for several months, according to his email.

“This has been by far the most stressful thing that I have ever been through,” Kunke said in the July 9 email.

He said in another email to the city at this time that he also was arranging to use his Keizer house as collateral for a $600,000 loan.

Brian Luse, an assistant city attorney, proposed a plan for Kunke to settle the debt in mid-August. The city would arrange a catch-up schedule over the next year for Rudy’s to pay $73,078.

The city provided no record of a response. Instead, 26 days after Luse’s proposal, Salem officials stiffened their approach.

On Sep. 7, 2024, Retherford emailed Kunke with default notices for Rudy’s three city leases.

The notices advised Kunke that the restaurant violated its lease by failing to pay rent.

“Should the above default not be cured, the city will pursue the remedies stated in Section 23 of the lease to terminate the lease and re-enter the premises,” the notices said. Rudy’s had 10 days or Kunke and staff would be locked out.

At the time, Rudy’s owed $72,778 in rent for its restaurant, banquet and butcher shop spaces, notices from Retherford said.

Two days later, Kunke came back with his own offer.

Kunke wrote to Luse that he would have the money to “get caught up” on rent payments and proposed a repayment plan for the $20,396 owed for Rudy’s pub space.

He didn’t address the amounts owed for the restaurant and banquet spaces.

Instead, he complained that Rudy’s took a financial hit over lost business because of city projects, such as the painting of the Chemeketa Parkade, according to an email.

“Does the city of Salem really want to take an aggressive stance and proactively act in a manner that isn’t supportive of the small businesses that are vital to the revitalization of downtown Salem?” Kunke wrote to Luse.

City records show that in September Rudy’s paid off six months of rent for its pub and banquet spaces, but still owed $106,227, according to an email from Luse to Kunke.

Records do not show a city response to Kunke’s repayment offer.

In the following month, Kunke told the city some of his hopes for financial rescue had been dashed. He still didn’t have the federal government’s half-million dollar check and the loan on his house hadn’t been finalized, he said in an email.

But his problems were deepening in ways unknown to the city.

On Sept. 19, Kunke entered a “settlement agreement” with the New York funding company, acknowledging that Rudy’s owed the firm $387,957.

The terms of the deal seemed tough. Rudy’s had to make ever-increasing daily payments to settle the account – starting at $250 a day for a week in September and escalating to $3,525 a day beginning Nov. 1, 2024.

As he navigated that settlement, Kunke turned to the city again, asking to start the repayment agreement Luse proposed nearly two months earlier.

The city acquiesced.

Then-City Manager Keith Stahley and Kunke in early October signed a repayment agreement.

But the city relented on its full demand, agreeing to forgive $39,655 of the Rudy’s bill if the business was faithful to the plan to repay $66,922.

Retherford told Salem Reporter the financial favor was justified.

“The city recognized the value of Rudy’s Steakhouse as a popular downtown anchor and a key employer and was attempting to work with the business through financial hardship,” she wrote.

The agreement required Rudy’s to pay $5,577 per month for a year to cover the old rent. It had to also pay rent going forward on time.

If any payment was over 30 days late, Rudy’s would lose its leases and the city would seek the past-due rents plus the forgiven fees, according to the agreement.

The following month, the New York company went to court, accusing Rudy’s and Kunke of breaking their earlier deal. Now, the company asked a court to award it $452,209.

Still more trouble and excuses from Kunke followed Rudy’s as the calendar turned into 2025.

Rudy’s final months

The restaurant again couldn’t cover its rent to the city.

The January rent check bounced over halfway through the month due to insufficient funds in the bank account, Diaz said in an email to Rudy’s management. He gave Kunke and Stewart five days to pay rent, which was $13,958 for all three spaces.

Kunke showed up in person at City Hall soon before the noon deadline on Jan. 27.

He blamed the city’s invoice system and said if staff couldn’t process the payment in time, “that is not on me,” he wrote to Diaz in a message just two minutes before the noon deadline.

By the time the rent was paid, it was almost three weeks late, city records show. The city knowingly overlooked that to give Rudy’s another chance.

“We were within our rights under the lease to declare you in default due to rent not being paid by the 7th of the month and move to termination and lockout. We did not. We gave you more time,” Retherford told Kunke and Stewart over a week later.

While struggling to keep up with monthly rent, the restaurant also started falling behind on its debt payments to the city.

Rudy’s paid for February but made no more successful payments under the agreement after then, Retherford confirmed with Salem Reporter.

Meanwhile, NewCo won a judgment in Monroe County Supreme Court on Feb. 27. Rudy’s and Kunke together now owed the company $547,755.

Bad news piled upon bad news for Kunke and his operation.

In the last days of February, the Revenue Department filed a lien against Rudy’s for $110,383 for unpaid transit and withholding taxes.

The business had just weeks to live.

Less than two weeks later, the Employment Department filed a $84,556 lien against the restaurant.

The restaurant’s main bank then froze the firm’s accounts at the start of April, Kunke told city staff in an email.

City records show checks written on the restaurant’s account for rent in January and then April were returned. The city noted there was insufficient funds to cover the checks.

This time, Rudy’s didn’t get another chance from the city.

Around 7 a.m. April 15, city workers taped notices to Rudy’s and the doors were locked – eight hours before the restaurant was scheduled to open. Staff learned of the closure as they arrived for their shifts that day, one former employee said online.

The closure left around 50 employees to file for unemployment or find jobs somewhere else.

Within hours of the closure, Stewart in an email asked the city to remove the signs because they caused “a lot of confusion and drama in the community.”

The next day, Kunke asked to meet with Mayor Julie Hoy and other city officials to discuss the terminated leases, an email from City Attorney Dan Atchison shows.

Atchison references a proposal discussed in the meeting, but Kunke and his team presented nothing in writing.

The only record of the meeting, city officials said, was emails written to city officials afterward by Atchison. Such communications are privileged and not subject to disclosure.

Salem Reporter asked for an interview with Hoy to talk about her knowledge of and involvement in the meeting, and emailed her questions. The mayor didn’t respond.

Other records showed that an attorney representing Rudy’s said a deal was in the works for a new investment group to take over the restaurant. So far, there is no indication that happened.

Kunke told Salem Reporter in a recent interview that information about him, Rudy’s and business with the city was “grossly” misrepresented in the news and online. 

He blamed the city and confusion about finances for the restaurant’s closure.

He wouldn’t talk about such matters for the record, instead asking for time to review questions with his attorney. He subsequently didn’t respond to questions.

Kunke did say he would provide payment records that would counter the city’s claims. He hasn’t.

One former employee sued Kunke in Marion County Circuit Court for a March paycheck she never received.

Kaitlyn Swearingen said in her complaint she was owed $1,596.

One effort to help employees is far outside of a courtroom.

Callie Jackson, a former manager at Rudy’s, is leading a different effort to help former Rudy’s employees: selling steaks, seafood and dessert in the alley beside the Rudy’s banquet space.

Jackson didn’t respond to a request for comment but a website shows people can order steak bites, filet mignons or a pack of steaks worth $790.

“Does this feel like a desperate operation? Absolutely – because it is. No one’s received unemployment,” Jackson said in a since-deleted Facebook post in early May. “We’ve got a few employees in serious financial trouble, and this scrappy ‘meat-in-the-street’ setup helps them get paid now.”

Contact reporter Madeleine Moore: [email protected].

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