The man shot and killed by police outside a Neenah, Wisconsin, motorcycle shop was a hostage and not the gunman who took hostages Saturday, the owner of the shop told a news website Sunday.

Michael Funk, 60, "was a hostage coming out" Steve Erato told Post-Crescent Media on Sunday. "They shot him in the alley. They shot the wrong guy." Funk had been hiding in the basement before exiting the shop where he was shot by police who surrounded the building.

The case gets complicated by the revelation that Funk, an employee of the shop, and Erato are plaintiffs in a $50 million federal lawsuit against the Neenah police for allegations connected to a police SWAT raid on the same motorcycle shop three years earlier.

"Mike worked there," his lawyer Cloe White said. "Mike was a hostage, not a suspect, he was not involved criminally. He was a hostage that was taken at gunpoint by this maniac."

The initial police statement on Saturday said police shot the man because he "did not comply with officers' instructions to drop the firearm and was subsequently shot at by one or more officers on scene."

Neenah Police Chief Kevin Wilkinson told Post-Crescent Media in an email that the Wisconsin Department of Justice Division of Criminal Investigation was now investigation into the shooting.

Investigators have not publicly speculated on a motive for the initial shooting, but Erato said it started when a man armed with a MAC-10 gun walked in to demand the return of his motorcycle which was sold to another man and at the shop for repairs.

Police also have not identified the other man who was arrested, who apparently was the gunman.