When Mike Isabella filed for Chapter 11 bankruptcy in September, the former “Top Chef” star had hoped the company reorganization would stop the financial bleeding and “get me back to where I was” six months earlier, before a former manager accused him and his partners of sexual harassment. He was, in short, fighting for a second chance to win over Washington diners who had helped his restaurant group grow into one of the largest in town.
But in a Chapter 7 filing on Tuesday, which seeks to operate six restaurants through Dec. 27 before closing them permanently, Isabella argues that the local and national media relentlessly threw shade on his business operations even after he agreed to a confidential settlement in May with former Isabella Eatery manager, Chloe Caras, who sued for “extraordinary sexual harassment.” Isabella, documents note, apologized publicly to a local TV reporter and implemented new “zero tolerance” sexual harassment policies at all of his restaurants. He was ready to “restore confidence in Mike Isabella and his restaurants.”
The press, Isabella argues, would not change its narrative and focused only on the negative.
“Notwithstanding Mike Isabella’s public apology and best efforts to implement a zero-tolerance policy . . . the press continued to incessantly report on Mike Isabella’s failures as a chef and business man,” the court documents say. The filing mentions stories by Grub Street, Eater, The Washington Post and, most recently, the Washingtonian cover story, which featured a photo of Isabella with egg on his face. (Washingtonian first reported on Isabella’s Chapter 7 bankruptcy filing.)
Isabella and his lawyers then chart how the “terrible publicity or market factors in the restaurant industry, in general” impacted the six properties included in the Chapter 7 filing: Kapnos and G sandwich on 14th Street NW, Arroz in the Marriott Marquis, Kapnos Taverna in College Park and three restaurants in Ballston, including Pepita, Yona and another location of Kapnos Taverna. Revenue, documents show, was routinely under projection, sometimes by as much as $30,000 in a single week.
As a result, according to documents, Isabella and his companies could not cover their debt payments for November, as required by the bankruptcy court. What’s more, Isabella’s six restaurants do not have “the cash available to pay December rent to any landlord.” Kapnos Taverna in College Park had already closed down on Nov. 3o; its landlord, according to documents, refused to let Isabella and his team operate two more days to “fund the final payroll.”
“Under the present circumstances, I am facing the sad realization that I no longer believe that any restaurant associated with my name can recover from the negative press that has enveloped me for nearly the entirety of 2018,” Isabella noted in his support letter to the Chapter 7 filing.
“There is no evidence to suggest that the press will cease its constant articles besmirching my reputation and businesses,” Isabella continued. “In fact, in late November and early December, more than nine months after the first article discussing the litigation surfaced, there has been an increase in negative press.”
Prior of the Chapter 7 filing, Isabella had already closed several restaurants: The first was Requin Brasserie in Fairfax, followed by Graffiato in Richmond, then Graffiato in Chinatown and, most recently, the ambitious Isabella Eatery, a nine-concept dining emporium inside Tysons Galleria. That food hall, which only lasted eight months, opened Dec. 11, 2017 — exactly one year before Isabella decided to call it quits. Two weeks after the Eatery’s closure, Isabella filed for Chapter 11, again blaming “bad press” for his business woes.
But investors had earlier told The Post that Isabella and his company had been overextended months before Caras filed her complaint. The Hotel at the University of Maryland in College Park alleged Kapnos Taverna, which opened a year ago, had stopped paying rent in January. On May 15, the landlord sued for back rent of $63,566.92, plus interest and fees. Eskridge (E & A), a company owned primarily by executives at real estate developer Edens, alleged Isabella had not paid rent for Requin Brasserie since Dec. 30, 2015, four months into the lease. On May 22, Eskridge filed suit against Mike Isabella Concepts for more than $715,000 in unpaid rent, plus other costs. In a September interview with The Post. Isabella said he had paid rent at both restaurants.
“I think the bigger picture is, and I’ve read it in other places, is that he grew too big without real money behind it,” said restaurateur Hilda Staples, who was a partner with Isabella at Graffiato. “It’s the money, it’s not about the press.”
Court documents in the initial Chapter 11 bankruptcy showed that investors and the more profitable restaurants in the Isabella empire were funneling cash or loans to the chef’s underperforming restaurants. But it wasn’t clear whether the cash infusions came before or after Caras filed her sexual harassment lawsuit. Regardless, a second Post story found even more allegations of harassment inside and away from Isabella’s restaurants, as well as a practice of using nondisclosure agreements, which workers said prevented them from speaking out about harassment. In the weeks to follow, Isabella lost business partnerships and customers and had nominations for awards rescinded.
As the allegations piled up, Isabella joined a grim fraternity of disgraced chefs. Mario Batali and John Besh were accused of harassing women at their restaurants, and Batali is under criminal investigation. But both of those chefs stepped back from their companies — though Batali has yet to fulfill his promise to divest — and issued apologies for their behavior. Prior to his televised apology with Fox 5, which came six months after Caras’s initial complaint, Isabella did neither: He and his lawyers slung barbs with Caras’s team, and he occasionally baited the press and his perceived enemies with hostile posts on social media. The bankruptcy filing makes Isabella the first celebrity chef to lose his business in the wake of a #MeToo scandal.
All throughout the crisis, Isabella held out hope that he and some of his restaurants might survive the mess.
In fact, two of his restaurants, Kapnos Kouzina in Bethesda, Md., and Requin at the Wharf in the District, are not part of either bankruptcy filing. When asked whether the restaurants will continue to operate as his six other establishments close down later this month, Isabella issued a statement through his spokesman:
“We’re fighting to keep those restaurants open, but we don’t know how long they can last. The constant bad press keeps customers from coming in and staff is scared and they quit. You can’t keep any restaurant open with 9 months of negative press.”
Washingtonian had earlier reported that business partners Nick and George Pagonis, who were named in the sexual harassment lawsuit, would take over the Isabella empire and the chef who started it all would step down from his own company. Isabella vigorously denied the report.
On Thursday, an attorney for the Pagonis brothers said they were in negotiations with landlords at current Isabella properties. “They are uniquely positioned and experienced to take over one or more of the restaurants,” attorney Demetry Pikrallidas told The Post. “That’s going to happen one way or another.”
“I think you’re going to find that they’re anxious to keep working and doing what they’ve been doing since they were kids: working in restaurants,” he added.
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