In 2008, Kronos Hotels and Resorts and its CEO, Charles Morais, were the toast of the industry.

The Malaysian-born entrepreneur's acquisition of eight hotels for $45 million in May raised the Atlanta-based company's holdings to 36 properties in 10 states with an asset value of $250 million.

And that deal came on the heels of a $62 million purchase of 16 hotels in June 2007. One of the hotels was the former Holiday Inn at 521 Greenfield Road in Lancaster.

Following that purchase, Forbes magazine predicted Kronos could become a major hotel owner and operator both nationally and worldwide.

The New York State list of delinquent taxpayers and Pa. attorney general's affidavits

Morais talked of offering Malaysian food delicacies in his hotel restaurants and creating his own toll-free call center for booking reservations at Kronos properties.

"We understand the hospitality business and intend to grow Kronos Hotels aggressively, yet responsibly," Morais told Forbes.

Today the Kronos empire lies in ruins, with properties taken in foreclosures.

While signs of trouble began appearing in the wake of the 2007 deal, they were not widely known and not reported in the Forbes article. Within a few months of that purchase, paychecks started bouncing at a number of properties and general managers were left scrambling to pay utility bills.

Now named in lawsuits filed by unpaid vendors and lenders and dogged by federal and state tax collectors, Morais and his partner, Sunil Mir, are wanted men.

A fast fall
How did the collapse happen so suddenly?

Five individuals actively involved in analyzing the hotel industry nationally agreed to offer their ideas for this article, though all requested anonymity.

The national economic downturn certainly had an effect. But those analysts don't believe that is the only reason.

One cited violation of state liquor and health codes at the Lancaster property. "They [violations] have nothing to do with the economy. You have to follow state and federal law. That's just horrendous management."

The fact that employee paychecks started bouncing at the Greenfield Road property and at other Kronos-owned facilities shortly after their acquisition was a sign of deeper problems.

Former Kronos employees, who also asked that their names not be used, said accounting operations were, at best, confusing.

"They got in over their heads and expected to make huge amounts of money," one said. "These properties could have been profitable if Kronos had bought them and let them run themselves. But Kronos kept one huge pool of money from all of the properties and distributed money from that."

Checks were often sent out at the last minute "to places where the power was about to be cut off. We would ask them, 'If you can give me the money today, why didn't you sign the original check we cut earlier?' "

But poor accounting practices can't be the only reason, one analyst said. While inept managers can drive a hotel into the ground, "it usually doesn't happen that rapidly. It's possible that the economy blindsided them but it blindsided a lot of folks."

Another echoed, "The fact they weren't even meeting payroll at the very beginning is problematic. All of that revenue had to be going somewhere. They may have been inept, but it's still difficult to believe that they could purchase so many hotels and bankrupt them so quickly."

Morais was able to build his empire during a period of economic strength in the early part of this century.

"Financing was easy," one analyst explained. "Lenders thought the economic boom was going to last and, particularly in the hotel/tourist industry, were willing to lend up to 85 percent of the total [purchase] amount.

"All of these guys had more money than they knew what to do with at the time."

Another said the strong hotel industry attracted many Asian investors.

Morais could also have inflated the value of his hotel operation in Malaysia because, explained one analyst, "I would doubt any American lender would take the time to actually get on a plane to Malaysia to check things out in person."

Lenders, the analyst said, often weren't concerned about the physical state of the properties being purchased. Strong bookings and franchise name were more important.

"Lenders assumed that if the franchise name was good [a Holiday Inn or Crowne Plaza] the franchise holder would make sure the property was in good shape physically and that the holder would make the owner adhere to their standards."

Tom Showalter, who worked as general manager at the Greenfield Road Holiday Inn prior to his December 2007 firing (see related article) said that's why Intercontinental Hotels Group, which owns the Holiday Inn franchise, is equally culpable in that property's demise.

"Had they been doing their job, listening to the complaints made about these properties, they would have told them [Kronos] to either fix the properties or lose the flag," he said.

"Yet they sat and they sat and they sat and ignored the problems until the lid got blown off and it became a P.R. [public relations] nightmare so then the flags started getting yanked left and right."

Pa. back taxes
The latest hit against Morais and Mir came in mid-April, when Pennsylvania Attorney General Tom Corbett charged them with owing $350,000 in back sales and retail taxes here.

But if Pennsylvania wants to get its money, it may have to take a number.

That's because Morais and Mir already owe more than $2.5 million to two other states in which their chain operated.

In its March 2010 report of Top 250 delinquent taxpayers, the New York State Department of Taxation and Finance lists Morais 66th ($1,000,009.96 owed) and Mir 67th ($979,873.08).

As in Pennsylvania, those amounts involve unpaid sales, use and withholding taxes — these for a hotel Kronos operates at John F. Kennedy International Airport in New York.

And according to the Cobb County, Ga., Superior Court Administration office, the two men have been assessed more than $500,000 in federal and state tax liens there.

The Internal Revenue Service has filed liens totaling $230,478 against Mir, $119,000 against Morais and $131,007 against one of their subsidiaries, Destination Hospitality LLC.

The state of Georgia's tax department has also filed a $98,000 lien against Morais.

Guests and workers at the JFK Plaza hotel near JFK airport in New York also want to speak with Morais and Mir.

The hotel, formerly a Crowne Plaza, lost its franchise in 2008, closed in early 2009, and re-opened in April as the JFK Plaza hotel.

According to a report in Hotel Voice, a publication of the New York Hotel and Motel Trades Council, when the hotel closed, workers were owed more than $1 million in back wages and benefit-fund payments. The hotel owners, the Voice reports, had also been garnishing some employee paychecks for child support, but never passed the payments to the intended recipients.

Upon re-opening, none of the union employees were rehired as the owners employed a nonunion work force.

The Voice reported that union employees staged a protest at the hotel April 20.

At the time, the hotel was occupied by airline passengers stranded in New York because of the Icelandic volcano-related travel disruptions.

Guests interviewed by the publication reported service in the hotel was "abominable" and that the hotel was having difficulty providing even water and food to them.

On April 21 labor arbitrator Phillip Ross ordered the hotel to recall union employees to their jobs.

That was the same day Corbett announced his charges.

In addition to the Lancaster property, Kronos owned hotels in Allegheny, Clearfield and York counties. All of the properties have been taken from the corporation in foreclosure actions.

Lancaster County wouldn't mind learning the men's whereabouts, either. According to Treasurer Craig Ebersole, Kronos owes more than $43,000 in unpaid hotel room taxes.

Where are they?
But finding them won't be easy.

"No one seems to know where these guys are," said Eric Shirk, assistant press secretary in Corbett's office.

A preliminary arraignment on the state charges is scheduled for 10 a.m. Monday, June 7, before Dauphin County District Judge Lowell Witmer.

But the real trick will be getting the two defendants to show up.

In the state's affidavit, both Morais and Mir listed their home address as 2767 Windy Hill Road, Marietta, Ga. That is the corporate address for Kronos Hotels and Resorts. Those offices are vacant. A letter sent to that address in March was returned as "undeliverable."

Still, Shirk said, the attorney general will send a certified letter to that address informing them of the court date. If Morais and Mir do not attend the arraignment, Shirk said, "an arrest warrant will be issued."

At that point, Shirk added, "We'll work with the local law enforcement agencies to try and find them."

Online records indicate Morais has a work visa, but no such record was found for Mir.

While his whereabouts are unknown, Morais was co-owner of a condominium in Dunwoody, Ga., that was reportedly occupied by his ex-wife and their son.

A source in Dunwoody, who did not want to be identified, said the condominium homeowner's association and Morais are embroiled in a lawsuit, and the condominium was scheduled to be auctioned off this month.

Morais also has a history of absenteeism in Lancaster County courts.

He was a no-show at a January 2009 preliminary hearing before Magisterial District Judge Denise Commins on charges of selling alcohol without a license at his Greenfield Road Holiday Inn. (Morais was the "responsible officer" for Portfolio Lancaster LLC, a subsidiary of Kronos Hotels created to operate the Greenfield Road property.)

Assistant District Attorney Andrew Gonzalez, who prosecuted that case, said there is an active bench warrant for Morais' arrest.

In Pennsylvania, Morais and Mir face four counts of theft by failure to make required disposition of funds received, third-degree felonies. Each count carries a maximum penalty of seven years in prison and a $15,000 fine.

Both Morais and Mir also are charged with 24 counts of willful failure to remit sales tax and two counts of willful failure to file sales tax returns. Classified as ungraded misdemeanors, each charge carries a maximum penalty of one year in prison and a $1,000 fine.

Owned by High
The Greenfield Road property was purchased by High Properties in two transactions: a purchase of the 4.5-acre site in June 2009, and then a purchase of the hotel building and an adjacent 5.3-acre parcel of land in December 2009.

The hotel was shuttered in February and remains vacant as High studies future uses for the property.

One analyst expressed sympathy for the hotel and its former employees.

"It's a shame what happened there," he said.

"That property was generating revenue. It is in a great location, right next to the visitor's bureau. It was getting older, but you can make an older property seem new if you keep maintaining it and upgrading its amenities. But once you let it go even a little bit it's going to fall fast and hard."

csmedley@lnpnews.com