Beach Hut contract canceled in Suffolk

Suffolk County on Friday cancelled its $2.8 million per year contract with Beach Hut, operator of food and bar concessions at Smith Point and two other county beaches. The company had pleaded guilty last month to criminal charges of failure to pay sales and income taxes.

Philip Berdolt, county parks commissioner, said the county sent a letter to Beach Hut Friday terminating the contracts, which date to 1999 and still had years to run. He said Suffolk will advertise a request for proposals to other firms to take over the concessions by Memorial Day weekend.

“It’s the appropriate call,” Berdolt said of the cancelled contract. “The fact is that funds were withheld from the county and a crime was committed.”

Fred Marsillio, Beach Hut president, said Friday he had not yet received the county letter and declined to comment.

Beach Hut last month pleaded guilty to filing false state income tax returns from 2012 to 2016 and failing to report $1.7 million in income to avoid paying state income tax of $127,783.

Marsillio’s Garden Grill pleaded guilty to violating state tax law and criminal fraud. He also pleaded guilty individually to violating tax law and criminal fraud. The Beach Hut operations in total paid restitution of $1.114 million in state and county sales tax, interest and penalties.

Beach Hut’s prosecution came after Suffolk Comptroller John Kennedy undertook an audit that found Beach Hut cheated the state and county out of $296,000 in sales tax associated with $3.4 million in sales. The guilty plea allowed Suffolk to recover $495,677 — $363,000 in unpaid sales tax and $131,000 in profit-sharing.

The popular concession, which featured food, bar service and entertainment most summer nights, operated not only at Smith Point in Shirley, but also Cupsogue Beach in Westhampton, and Meschutt Beach in Southampton.

Berdolt said he hoped to offer similar services with a new vendor but said, “We’re open to all proposals.”

Berdolt said bids will be advertised in the coming week and sent to more than 20 vendors. The competitive process will be open to any businesses that want to make proposals, he said.

Specifications will require the new vendor to install a “point of sale” computer system to allow the county to track purchases in real time. The vendor also will have to install security cameras over all cash register areas.

The concessions generated $1.4 million in business at Smith Point last year, $890,000 at Meschutt and $660,000 at Cupsogue.

The county got a licensing fee at each site of between $22,000 to $35,000, as well as 10 percent of all sales over $100,000. That generated more than $300,000 in revenue for the county.

Beach Hut’s contracts with the county each were for 10 years with two five-year options to renew. Had the agreement not been cancelled, its contract at Cupsogue could have lasted until 2021, at Smith Point until 2031 and Meschutt until 2035.

The criminal case against Beach Hut also involved its operations at Babylon Town’s Tanner Park and Venetian Shores Beach. Babylon recovered $66,000.

Town Supervisor Richard Schaffer said town attorneys are reviewing Beach Hut’s contract, and he expects a final decision within the next week.