Ownership dispute shadows the Water Works Restaurant

After 30 years of failed restoration efforts, the Fairmount Water Works finally seemed cursed no more after the 2006 opening of an upscale restaurant that helps preserve both a national historic landmark and the city's most breathtaking view of Philadelphia's iconic Boathouse Row.

Now the taxpayer-financed Water Works Restaurant & Lounge and its politically connected owner, Michael Karloutsos, are entangled in a lawsuit in which an allegedly spurned business partner contends profits are being "siphoned away" and asks a city judge to place the business in the hands of a court-appointed authority.

That possibility appears remote - Common Pleas Court Judge Mark Bernstein is scheduled to hear arguments on the receivership request Monday - but the dispute nonetheless puts a dark cloud over the restaurant for the second time in a year.

In April 2010, Karloutsos' brother-in-law, Leonidas Agorastos, pleaded guilty in federal court in Philadelphia to stealing hundreds of thousands of dollars by inflating the restaurant's bills from food and service companies. He and his wife owned a vending company that handled billing for the restaurant.

Agorastos is serving a 33-month prison sentence at the Moshannon Valley Correctional Institution in Philipsburg, Pa., and was ordered to pay back more than $400,000 to the restaurant.

More troubling these days is the lawsuit filed by Vincent D'Ambrosio, Karloutsos' former close friend and a onetime employee of the Gilbane construction company.

D'Ambrosio says that with his real estate and engineering background, he conceived of the restaurant with Karloutsos, but that Karloutsos shut him out of a 10 percent ownership interest and owes him a $200,000 consulting fee.

D'Ambrosio and his lawyer, Peter Leyh, declined to comment.

Karloutsos said in an interview that D'Ambrosio had walked away from the deal - and never invested a dime. "He has about as much rights to the Water Works as I do to Le Bec-Fin," Karloutsos said, referring to the Walnut Street institution, in which he has no involvement.

The company that formally owns Karloutsos' restaurant, which sits at the foot of the Philadelphia Museum of Art, is Thea at the Water Works. Most of the $3.2 million project was financed with a $2.1 million taxpayer loan from the Philadelphia Industrial Development Corp., a quasi-governmental agency that handles much of the city's economic-development funding.