One month after a sexual assault allegation engulfed the House of Music, Arts & Culture (HMAC) in a social media maelstrom, its owners have filed for bankruptcy and plan to sell their business.
HMAC (formerly the Harrisburg Midtown Arts Center) will continue its normal operations as its owners restructure debt obligations to more than three dozen creditors, said John Traynor, who owns HMAC with his husband, Gary Bartlett, and two other partners.
Their company, Bartlett, Traynor & London LLC, last week filed for Chapter 11 bankruptcy in the U.S. District Court for the Middle District of Pennsylvania. They believe that they have a buyer for the business, according to the filing documents. HMAC listed more than $5 million in total assets, chief among them the sprawling, historic building at 1110 N. 3rd Street.
Traynor hopes to transition to new management and ownership by 2019.
“This allows us to reorganize, take a breath, and work with creditors,” Traynor said. “I think HMAC could use a fresh start, and Chapter 11 will help facilitate that.”
Traynor and his partners have developed HMAC for a decade and, in 2009, opened the first phase, Stage on Herr, a bar and concert venue. In all, they’ve since spent millions of dollars renovating the 34,000-square-foot property, which served as the city’s Jewish Community Center starting in 1924 and later housed Harrisburg’s Police Athletic League.
Today, HMAC comprises three separate performance venues, as well as a full-service bar and kitchen. It hosts shows by local and national performance artists, corporate events, weddings and community gatherings.
According to Traynor, it’s one of the largest privately funded development projects in Midtown Harrisburg.
Crimes and Consequences
Traynor said that that HMAC’s finances were healthy until July, when an HMAC customer claimed that she was drugged inside the bar and later beaten and raped. On social media, she said that HMAC’s staff failed to recognize her as a victim of date rape drugs and left her vulnerable to her attacker when they asked her to leave the bar.
She posted those allegations on HMAC’s public Facebook page on July 28 and deleted them within an hour, Traynor said.
But a screenshot of her post, along with a sensational article from the Philadelphia-based site YC.news, circulated in other online community groups. A conversation in the Midtown Harrisburg Facebook group generated hundreds of comments from people both excoriating and defending HMAC.
The Harrisburg Police Bureau investigated the woman’s assault and quickly debunked her allegations against HMAC. Chief information officer Gabe Olivera told the press that the woman left the bar premises with her attacker, voluntarily, after it closed. The assault occurred later that night in a home in Uptown Harrisburg.
Michael Ray Wright was charged with the woman’s rape on July 30. But Olivera said that HMAC could not have prevented the assault.
“We were totally vindicated by the police,” Traynor said.
He said the claims that the bar mishandled the incident were the work of “disgruntled ex-employees who work for a competing venue.”
The accusation sparked a firestorm nonetheless. Traynor says that the woman’s refuted allegations were “conflated” with other grievances against him and his business.
On Facebook, some community members said that reports of racism, predation and poor working conditions at HMAC long ago led them to boycott the establishment. Traynor denies their claims wholesale.
“I’ve heard them all,” he said. “I’ve heard that I’m a sexual predator, that I drug people, that I cultivate a [bad] culture, but it’s so ridiculous. Some of the people that are maligning me worked for me for seven, eight years. I think they don’t understand the ramifications of what they’re doing. The whole advent of social media and how easy it is to pile on and make false statements is a new phenomenon.”
Traynor admits that Stage on Herr had a freewheeling reputation in its early days but said that HMAC’s management became more professional as the business grew. He claims he didn’t take the social media “bashing” personally.
But he said he won’t forgive the critics who allegedly contacted national booking agents and convinced bands to back out of HMAC gigs.
In all, the firestorm cost HMAC a dozen shows and some $200,000 in revenue, Traynor said.
“We were operating on cash flow, and our cash flow was severely impacted,” Traynor said.
Under Chapter 11, HMAC will be able to rebuild its events calendar and renegotiate debt payment schedules, Traynor said. He said that the company did not have any problems fulfilling its debt obligations until recently.
In the coming weeks, Traynor said, HMAC’s owners will also prepare a case against a dozen people who he claims defamed the business and interfered with its performance contracts.
He said that he and his partners have collected evidence to press charges for tortious interference of contract – the act of intentionally damaging a business agreement and causing financial harm.
Traynor said that the Dauphin County District Attorney’s Office is investigating the claims of interference. That office could not be reached for comment on Wednesday.
He expects that a dozen people could be named in a civil complaint.
“They’ll all pay,” Traynor said. “They can’t do what they did without consequences.”
Not Going Away
It’s unlikely that HMAC’s patrons will notice that the business has filed for bankruptcy.
Filing under Chapter 11 of the federal bankruptcy law grants debtors temporary relief from liabilities while they reorganize their assets. Unlike a Chapter 7 filing, it does not mean that the business will liquidate and close.
“A company doesn’t have to be insolvent to file for bankruptcy,” said Juliet Moringiello, an associate dean and bankruptcy law expert at Widener University Law School. “Chapter 11 was designed as a process for a company with a good business model to pare down its debts and renegotiate contracts.”
According to bankruptcy filings, HMAC has less than $10 million in liabilities. The documents indicate that the company will be able to pay its debts in full once it emerges from restructuring.
Twenty of HMAC’s creditors – including business vendors and utility providers — are unsecured, meaning they wouldn’t be guaranteed money in a liquidation. Peggy Grove Enterprises is the largest unsecured creditor, with $170,000 invested in the project.
The City of Harrisburg is a secured creditor due to its status as a taxing entity, according to city Solicitor Neil Grover. Property records show that HMAC owes $19,000 in local property taxes, including $4,700 to the city of Harrisburg and more than $11,000 to the Harrisburg School District.
Even though a Chapter 11 filing may indicate that a business is in distress, it usually doesn’t hamper its services, Moringiello said. She pointed to America’s airline industry as an example.
“Every legacy airline in America has filed Chapter 11, but as far as passengers are concerned, the planes keep flying,” Moringiello said. “Filing for bankruptcy doesn’t mean a company is going away.”
That’s good news to Jeb Stuart, a lifelong Harrisburg-area resident and preservation advisor to the Historic Harrisburg Association. He said that HMAC’s multi-use spaces have enriched Midtown Harrisburg and preserved an important historic structure.
“It’s very contemporary and animated and innovative,” Stuart said. “To have a space for public assembly with a huge auditorium and stage capabilities, that’s a major contribution to North 3rd Street.”
Traynor said that HMAC will continue its normal program of musical shows, weddings, corporate events and fundraisers through the end of the year. But its owners are also planning new projects.
The project received a $1 million state Redevelopment Assistance Capital Program (RACP) grant in December, which will finance infrastructure improvements. Traynor hoped to use the money to expand the Capitol Ballroom and refurbish the basement to accommodate a music school.
He insists that the grant is the only public money HMAC has received.
Traynor said he wants to see HMAC endure for years to come, which is one reason he wants to find it a new owner, he said. He hopes that the restructuring under Chapter 11 will facilitate a sale.
“What I would hate to see is for this project to close,” Traynor said. “We put a lot of money and sweat equity into it, and now it’s time for a transition.”
The owners’ desire to sell pre-dates the social media firestorm, Traynor said. They’ve been negotiating with national entertainment agencies for the past three months, he said.
HMAC’s assets include more than $5 million in property, $44,000 of inventory and approximately $22,000 in accounts receivable, according to its bankruptcy filings.
Among those assets are HMAC’s liquor license, which it will defend in a Pennsylvania Liquor Control Board hearing later this month.
The PLCB put HMAC under a conditional licensing agreement (CLA) in 2014. It placed additional requirements on HMAC’s license, namely that the owners install soundproofing systems and perform additional security checks every night.
Traynor said that the CLA arose from noise complaints. He is confident that the business will retain its license after the hearing.
He also denied that the PLCB hearing had any influence on the decision to file for bankruptcy.
If the PLCB yanks the license, however, the value of HMAC’s assets would depreciate significantly, Moringeillo said. She thinks it unlikely that the Chapter 11 filing will influence the PLCB’s decision.
Wednesday, Sept. 6: This article was edited to correct the name of a Philadelphia-based news site. It is YC.news, not YC.com.