Chapter 1: How it Started

Henry and Jenna McAdams owned the H&J family diner on a busy street in East Hampton on Long Island, New York. For years the restaurant thrived. It was a familiar spot for locals to meet for a weekend breakfast or an evening coffee. Teens and students at the nearby college came in for late-night ice cream and pies. And the Hamptons beach crowd keep the place humming during the Summer months when most of the yearly profit was made.

Henry and Jenna poured much of their life savings into the restaurant, expanding its capacity twice over the past 15 years as the business grew. Henry worked full time at the diner with a staff of 2 cooks and 3 servers. Jenna had been a secretary at her local Parish church for many years but had just moved this past year to a position as executive assistant to the head of the local community college. Their only daughter, Katherine (called “Kitty” by all), was 15 years old and in 10th grade at St. Theresa Catholic high school. Kitty planned on working at the restaurant during the coming summer break.

Then COVID-19 struck and struck the New York region particularly hard. Stay-at-home orders closed down the dinner, Jenna was laid off from the local college which switched to on-line learning, as did Kitty’s high school. Jenna’s unemployment paid only a fraction of her salary, and it was not scheduled to last very long.

Income from the diner dried up immediately. Henry checked the take-out delivery apps like GrubHub and DoorDash and found that they charged commission fees to the restaurant of up to 30% over the cost of the order. That was in addition to the small delivery fee actually paid by the carry-out customers. These excessive commission fees were paid directly by the restaurant to the delivery app and left virtually no profit for the restaurant itself.

And there just wasn’t enough demand to justify keeping the restaurant open solely for curbside carryout. The only financially sound option was to close the restaurant and wait out the shut-down order. Henry tried to do the right thing and keep his employees paid, even without working, but he soon had to fire them.

Unfortunately, the bills kept on adding up – rent for the restaurant, mortgage and car loans, groceries and supplies, and Kitty’s high school tuition were all still coming due monthly. Henry and Jenna kept going for the first two months of the shut down by drawing on their retirement savings and draining Kitty’s college fund.

But after two months of shut down, Henry and Jenna were in real financial trouble and had to consider bankruptcy and losing the restaurant. The anticipated social distancing requirements over the Summer would allow Henry to open the diner with only ¼ capacity and then after some time, assuming no further spike in infections, ½ capacity. Henry figured that the continued social distancing requirements would keep the restaurant from turning a profit for the entire Summer season, even if Henry worked behind the counter and Jenna and Kitty were the only servers.

Henry calculated at he needed $50,000 to $60,000 in new money to keep the restaurant and his family afloat until the restaurant could open at full capacity. He contacted local banks but got nowhere with them. He contacted the Small Business Administration and learned that all the money set aside for small businesses had been scarfed up already, some by larger restaurant chains.

His only option left was going to loan sharks for a money at higher interest charges than he really could afford. Henry contacted Gino Mostone, one of his food suppliers who he thought might be connected to the New York mafia families, to see about a loan that way. Gino told him about another option – making and selling amateur porn. Gino put Henry in contact with “East Coast Eddie,” a porn producer who specialized in amateur porn products. Henry met him one afternoon when Jenna thought he was meeting with more bankers for loans.