If there’s a Donald Trump of the specialty coffee world, he’s Nicholas Cho, the charismatic barista with a history of avoiding taxes and reacting sharply to critics.
Washingtonians of recent vintage probably have no clue who Cho is. He used to operate the much-admired Murky Coffee, with locations in Arlington and on Capitol Hill. It was the forerunner of today’s third-wave shops — Qualia, Peregrine Espresso, Compass, the Wydown and many more — that flood our veins with coffee prepared from high-quality, single-origin beans from around the world. Both Murky locations have long since closed, done in by tax violations, higher rent, mismanagement or some combination of the three.
But before he shuttered the shops and moved to California to co-found a roaster, Cho developed a reputation as Murky’s guard dog, willing to take a bite out of anyone who messed with the integrity of his coffee products. Arguably, his most famous episode came in 2008, when he got into a war of online words with a customer who didn’t appreciate Murky’s approach to serving espresso (that is, refusing to dilute it with ice). It was an exchange of tirades that ended with Cho threatening to punch the guy in, well, his baby maker.
The fight broke the Internet way before Kim Kardashian.
Nearly two years after that episode, Cho pleaded guilty to eight counts of criminal tax violation for not submitting tax receipts from Murky Coffee on Capitol Hill, which closed in February 2008 when the D.C. Office of Tax and Revenue padlocked the property. Cho faced nearly four years in prison, but a D.C. Superior Court judge suspended the sentence and placed Cho on five years’ supervised probation. The probation came with conditions: Cho would complete 400 hours of community service and pay more than $190,000 in restitution.
More than six years later, Cho has finally paid off his debt to the District of Columbia. But it required a protracted court battle and the District’s willingness to forgive more than $30,000 in interest. In the end, Cho paid slightly more than $157,000 to resolve the tax debt.
“We were able to get all but $30,000 back,” said Robert P. Marus, a spokesman for the attorney general’s office. “If the judge sent him to jail, we wouldn’t have been able to get any of that back.”
So what caused Cho to cough up the cash? The D.C. Office of the Attorney General filed a motion in late 2014 to revoke Cho’s probation and toss him in jail. The District accused Cho of willfully not complying with the conditions of his probation. The office laid out the numbers: By June 2015, more than five years after pleading guilty, Cho had paid back only $17,169 (with a balance of more than $170,000) and had completed 29 hours of community service (6 percent of the amount required).
The district attorney’s office accused Cho of, among other things, voluntarily impoverishing himself; failing to take advantage of his coffee expertise to earn a living; spending cash on overseas travel instead of repaying his debts; and concealing income. The attorney general’s office alleged that Cho had reported only $1,000 in income from 2010 to 2013, while city investigators unearthed 1099-K forms allegedly showing that Cho had earned more than $160,000 in the years 2011 through 2013.
“The defendant has failed virtually every probationary condition, no matter how easy and uncomplicated such conditions have been. It is evident from the defendant’s conduct that he has not taken his probation seriously,” the attorney general’s office alleged in court documents.
In court documents responding to the District’s motion to revoke probation, Cho’s attorney, Eugene Ohm, attacked the District’s allegations point by point. The financial crisis of 2008 has hampered Cho’s ability to find employment, the attorney argued. Cho’s overseas travels were industry-related trips for lectures or networking, paid for by other entities. The $160,000 was payments to Wrecking Ball Coffee, a San Francisco-based roaster that’s owned by Cho’s wife, Trish Rothgeb.
“When setting up the PayPal Business account for Wrecking Ball Coffee, Mr. Cho provided his own Social Security number,” Ohm argued. “Mr. Cho was unaware that this would result in a Form 1099-K being issued in his name in connection with the income of the business.”
Additionally, Cho’s attorney argued that his client has “deep, pervasive” financial problems that extend beyond what he owes to the District. Cho, the attorney said, has had to use what little money he has earned or borrowed to cover numerous liabilities “while still providing himself with the necessities of life.”
The attorney general’s office countered that it had collected enough evidence to prove Cho could pay off his debt. The office declined to share all its evidence. But spokesman Marus said work by Bayly Leighton, assistant attorney general, and James Hessler, a criminal investigator with the D.C. Office of Tax and Revenue, gave Cho little choice but to make restitution and start volunteering his time. He has now completed his community service hours.
And where did Cho get the money to cover his tax debt? According to the attorney general’s office, two checks were submitted on Cho’s behalf. The first one, in the amount of $100,000, arrived June 15. The second one, for $39,885.38, arrived June 28. Both were drawn on an account owned by L.M. Rothgeb. Nexis records indicate L.M. Rothgeb is related to Trish Rothgeb, Cho’s wife and business partner in Wrecking Ball Coffee.
On Aug. 10, a Superior Court judge approved the District’s motion to withdraw the request to revoke Cho’s probation, officially ending the city’s more than eight-year battle to get the former Murky Coffee owner to pay his taxes.
“I’ve completely fulfilled all of my financial obligations to the District of Columbia. The court canceled the motion to revoke probation because I have repaid all of my obligations to the District including penalties,” Cho said in an email. “I don’t believe that I have anything else to say on the matter.”
But that’s not the end to Cho’s tax woes. He still owes more than $84,000 to Arlington County for unpaid meals taxes (and interest) connected to the Murky Coffee outlet in Clarendon, which closed in 2009. Cho has not paid the county anything since 2009, said Chris Sadowski, deputy treasurer for litigation in the Office of the Treasurer. Unlike the District, Arlington County has not prosecuted Cho in criminal court and cannot threaten him with jail time for not paying his taxes.
“He has not come close to paying us, but this is an interesting development” in the District, Sadowski said. “Maybe he’ll have some money to dedicate to us.”