The party may be coming to an end for D.C. megaclub Ibiza, long after complaints about noise and violence at the Northeast establishment.
Club owners faced a double dose of bad news this month via a cease-and-desist order by the District’s Alcoholic Beverage Regulation Administration and a court-appointed trustee recommending the club’s bankruptcy be converted to a Chapter 7 case so the business can be liquidated to pay its debts.
The club, which noted $1.6 million in liabilities in its initial 2013 bankruptcy filing, now is closed as the bankruptcy moves forward, leaving its owners unable to generate revenue from its go-go band shows.
In court filings, U.S. Trustee attorney Bradley Jones notes that Ibiza’s owners are operating without a proper business license and have failed to abide by other requirements during the bankruptcy proceedings, including filing recent monthly reports on expenses and revenue.
Security concerns over incidents that have occurred since the club filed for Chapter 11 bankruptcy in June 2013 — fights, breaches of its security plan, drug use at the club, and sale of alcohol to minors — also have raised red flags for the Justice Department’s bankruptcy watchdog.
“A facility with the ability to admit over 1,300 people at any given time should be expected to be able to ensure their safety, cooperate with the efforts of law enforcement, and ensure that its security footage is adequately maintained and obtainable,” Mr. Jones wrote in documents filed in U.S. Bankruptcy Court for the District on March 18. “Similarly, the allegations of assaults with dangerous weapons, large fights, the sale of alcohol to minors, and overcrowding raise serious questions regarding management’s ability to run this business in an appropriate manner.”
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A hearing on the motion to convert the case from Chapter 11 to Chapter 7 filing is set for June.
In the meantime, the club’s owners are fighting the March 19 cease-and-desist order that shuttered the Northeast nightclub a day before it was set to host a spring break party featuring the local go-go act Backyard Band. Recent events booked at the venue — including a tribute night to former D.C. Mayor Marion Barry after his death — are a far cry from the initial vision for the megaclub, which featured appearances by celebrities like Kim Kardashian and big-name electronic dance music DJs.
The area around Ibiza, once a strip of warehouses and parking lots adjacent to the District’s Housing Authority headquarters, has changed about as much as the club’s bookings since it opened in 2007. Hundreds of millions of dollars invested in high-rise apartments and glitzy hotels have turned the once gritty area into the stylishly rebranded “NoMa” neighborhood, named for its location north of Massachusetts Avenue.
Asked what the future holds for the club in the transitioning neighborhood, Aldo Truong, a managing member of Ibiza, isn’t sure.
“I really can’t tell you what our future holds,” said Mr. Truong, declining to discuss the bankruptcy proceedings. “We have a lot of pending legal matters at hand. We’ll get through that a day at a time and see where it goes from there.”
For now the main focus is to get the club up and running again. “Being closed obviously greatly effects income for revenue and income as a source to pay bills, so it affects us a lot,” Mr. Truong said.
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An attorney representing the club says the owners have tried to work with the city’s business licensing agency, the Department of Consumer and Regulatory Affairs (DCRA), to obtain the licenses to reopen. But, he said, the agency keeps asking the owners to jump through hoops after they completed previously agreed-upon steps.
“They keep moving the goal posts,” said attorney Richard Bianco.
A settlement agreement between DCRA and Ibiza filed in April laid out six steps the club had to take in order to be granted a full public hall license, including paying bills owed to the Metropolitan Police Department for officers hired for event security, drafting a new security plan and addressing building code violations. According to court filings, Ibiza’s basic business license expired in June 2013. The club was issued a 30-day license allowing it to operate in April, but the full license was never granted.
“Essentially, you guys do six things and DCRA will issue the license. Will. It’s very unambiguous,” said Mr. Bianco, describing the terms of the settlement. “We did the six things and we gave them notice. We did the six things and they’ve never really disputed that. What they have done is they’ve come back and they keep moving the goal posts. They say now, ‘We want you to do this.’”
Mr. Truong declined to say how much Ibiza has spent to try to come into compliance, describing it only as “a lot of money.”
Mr. Bianco argued Wednesday before the alcohol board that the cease-and-desist order issued through the Alcoholic Beverage Regulation Administration is based on incomplete information provided by DCRA inspectors. He plans to make similar arguments at a hearing Friday in D.C. Superior Court, where club owners hope a judge will grant a request for a preliminary injunction that would void the cease-and-desist order.
Citing the pending litigation, DCRA spokesman Walter Crawford said the agency is unable to comment on the claims made by Ibiza owners.
Alcohol board members have 30 days to decide on the challenge to the cease-and-desist order.