D.C. officials allow sports bar owner to turn theater space into gaming venue
Words and photo By Jeffrey Anderson
A Penn Quarter sports bar that is the first drinking establishment to offer “games of skill” for profit in the District has been operating illegally for the last eight years, according to court documents, public testimony, the D.C. Municipal Code and records on file with the Alcoholic Beverage Regulation Administration (“ABRA”) and the Department of Consumer and Regulatory Affairs. (“DCRA”).
The Office of Attorney General Karl Racine, the city’s top law enforcer, *concedes that it did not vet the bar owner’s licensing and regulatory status before approving “Dragon’s Ascent” as an electronic “game of skill” that offers cash payouts to winning players.
But an extensive review by District Dig shows that Penn Social, the sports bar at 801 E Street N.W., continues to operate on a liquor license issued to a comedy club with a different name in 2011, in an area zoned for theater and performing arts venues.
Public records related to Penn Social, one of more than a dozen establishments operated by sports bar impresario Geoffrey Dawson, are riddled with inconsistencies and misrepresentations, even as Dawson has become the first bar owner to get approval for electronic gaming. (Dawson also is reportedly looking to add sports wagering.)
The history behind Penn Social is convoluted and contentious. The regulatory framework for drinking establishments—where gambling is destined to flourish—is byzantine. Agencies that have taken a laissez-faire approach to Penn Social are passing the the buck and are unable to defend an aberrant paper trail.
A close reading of that history could jeopardize its underlying liquor license and raise questions of fairness for other drinking establishments that play by the rules.
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At a hearing in January on an “emergency” request from Mayor Muriel Bowser, the D.C. Council approved regulations for applicants such as Penn Social that require ABRA approval to install an electronic game of skill device.
For a device to be approved as a game of skill, Racine’s office must find there is no element of chance involved in the exercise of putting money into a machine to play for a payout.
Later that morning, however, an arts activist appeared before Ward 5 Councilmember Kenyan McDuffie, chair of the Committee on Business and Economic Development, and protested Penn Social’s licensing status as well as its gaming application.
“Penn Social LLC is not a legal entity,” Elizabeth Croydon, a professional comedian, writer and producer told McDuffie at his oversight hearing, claiming that Dawson and a business partner changed the company name and use in order to flip the venue from a comedy theater to a sports bar in violation of zoning regulations.
“ABRA has disregarded the arts zoning to allow for tavern licenses which are prohibited,” Croydon said of Dawson’s allegedly illicit conversion.
“The total lack of lack of transparency and accountability by ABRA…merits a full investigation by the D.C. Council.”
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According to court records, 801 E Street was a vacant lot in 2004 that was developed under a plan approved by the General Services Administration, the National Capital Planning Commission, the National Park Service and the National Trust for Historic Preservation.
DCRA records show that on May 6, 2010, veteran comedy club owner John Xereas registered a limited liability company named Riot Act DC LLC and filed Articles of Organization and an Operating Agreement along with Dawson and Marjorie Heiss, Dawson’s longtime attorney.
Dawson, Heiss and Xereas, formerly a part owner of the DC Improv and founder of Riot Act Comedy Club, each contributed $100,000 as “Managing Members.” Their lease, dated December 30, 2010, stated that the space must be “solely used as a comedy theater.” The lease specifically precluded “any video, pinball or gaming machines.”
In an application for license and zoning certification, the partners described the venue as “Live comedy theater serving American fare and selling theater related merchandise such as t-shirts and DVDs.”
On April 8, 2011, DCRA’s Zoning Administrator Matthew LeGrant signed a Zoning Certification that certifies the premises for a “comedy theater/bar & restaurant.”
According to the Certificate of Occupancy, dated August 1, 2011, DCRA approved use of the space for “Theater, including motion picture or performing arts.”
This authorized Riot Act DC LLC, trading as “Riot Act Comedy Theater,” to operate a theater and bar on the lower level, with a ticket booth and bar/dining area on the ground floor, in the heart of Penn Quarter, a couple blocks from what is now known as Capital One Arena.
On August 3, 2011, ABRA issued a liquor license to Riot Act DC LLC, again trading as Riot Act Comedy Theater, and the partners were off and running.
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Today, DCRA records no longer show Riot Act DC LLC as the company registered at 801 E Street on May 6, 2010; instead, the DCRA records show the registered entity as Penn Social LLC.
But in August 2011, after designing and building out the space, signing up comedy talent and launching a social media presence, the partners opened Riot Act Comedy Theater in August to critical acclaim.
Before long, the partners were at odds. According to a lawsuit Xereas later filed in U.S. District Court, Dawson and Heiss treated the comedy club as a personal piggy bank, supporting and subsidizing other business ventures and commingling and misappropriating funds.
Dawson and Heiss countered that Xereas was an unreliable partner and ineffective manager who signed contracts on behalf of the company without informing them, hired comedians without written contracts, and hired ineffective friends and family members.
By January 2012, with relations damaged beyond repair, Xereas filed a trademark application for Riot Act with the U.S. Patent and Trademark Office as the sole owner, the lawsuit states.
Dawson and Heiss soon fired Xereas’s mother, brother and friend, and, citing their majority membership status, removed Xereas as a Managing Member, fired him and locked him out of the club.
A battle over the Riot Act trademark ensued, but Xereas remained as a member with an equal share in the company, according to the most recent ABRA license renewal application reviewed by The Dig.
After protracted litigation over what Dawson and Heiss characterized as a simple “business divorce,” a jury found that the pair had used the Riot Act business plan to gain control of the space and wrongfully terminate Xereas.
Both sides have appealed to the U.S. Court of Appeals.
Dawson did not return calls from The Dig. Xereas declined to comment for this story.
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Soon after they ousted Xereas, Dawson and Heiss converted Riot Act Comedy Theater into Penn Social, a sports bar with game machines, drinking contests, dance parties and pub crawls—features typical of Dawson’s numerous bars, restaurants and billiard halls in Penn Quarter, Gallery Place, Dupont Circle and Georgetown.
ABRA records show that on June 25, 2012, Heiss applied for a change of trade name, from Riot Act Comedy Theater to Penn Social. ABRA approved the change, but Riot Act DC LLC retained the liquor license, approved for business purposes as a theater.
On July 14, 2012, Penn Social opened with a revamped floor plan including extra bars and a dance floor. The Dig could not confirm any renovation permits that would apply to a bar or tavern.
Dawson and Heiss soon amended Riot Act’s Articles of Organization to rename the company to Penn Social LLC, claiming approval “by those members with voting rights holding at least a majority in the profits of the limited liability company,” according to a December 27, 2012, filing with DCRA, which approved the amendment on January 3, 2013.
The Articles, however, failed to amend the purpose of the company “to run a comedy theater, bar, restaurant and all activities incidental or relating to,” according to documents admitted in the Xereas lawsuit.
Even if a majority of members had amended the Operating Agreement to convert to a sports bar—a substantial change in business purpose—D.C. Municipal Code Section 29.804.07 states that, “The operating agreement may be amended only with the consent of all members.”
Yet there is no indication in the court file or anywhere else that Xereas ever consented to any such amendments.
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Having achieved a disputable corporate name change, Dawson tried to change the name on the liquor license from Riot Act DC LLC to Penn Social LLC, on March 20, 2013. A spokesman for ABRA confirms that he did not submit the required documents, however.
Even now, ABRA records show Riot Act DC LLC—not Penn Social LLC—as the licensee on a multi-purpose license reserved for theaters and performing arts venues.
Another irregularity exists: On June 20, 2013, Dawson filed an Application for Certificate of Occupancy with DCRA that uses Penn Social LLC as an applicant name. By then, Penn Social had been operating as a sports bar for almost a year.
That did not stop Dawson from describing the proposed use exactly as he described it when Riot Act Comedy Theater obtained its Certificate of Occupancy back in 2011: “theater, including motion picture or performing arts.”
Nevertheless, a day later, on June 21, 2013, DCRA issued a new Certificate of Occupancy for the theater, ticket booth and bar/restaurant to Penn Social LLC, trading as Penn Social.
Handwritten notes by a zoning reviewer further specify an approved use consistent with ABRA’s multipurpose zoning for “legitimate theatres, universities, museums, conference centers, art galleries, or facilities, for the performance of sports, cultural, or tourism-related activities.”
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Unauthorized company amendments, factually inaccurate statements and alternating company names between ABRA and DCRA are not a good look for a prolific bar owner.
Xereas argues in court that the unauthorized conversion from a comedy theater to a sports bar using the Riot Act name has allowed [Dawson and Heiss] to use backdoor tactics to “mislead government agencies and maintain their operations.”
He may have a point—though it is not clear that anyone in D.C. government is being mislead.
In his ABRA Renewal Application dated March 14, 2019, Dawson identified the licensee as “Riot Act DC LLC (now known as Penn Social LLC),” then elsewhere on the application identified the company as “Penn Social LLC (formerly known as Riot Act DC LLC).”
On March 21, 2019, for purposes of obtaining a Clean Hands Certification from the Office of Tax and Revenue (“OTR”), he certified to ABRA on behalf of Riot Act DC LLC that he is the sole Managing Member. That same day, Heiss, who told The Dig in a recent interview that she sold all but one of her shares back to Dawson in 2012 and moved to Providence, Rhode Island thereafter, certified to ABRA that she too is a Managing Member.
For some reason, OTR then issued a Certificate of Clean Hands for Riot Act DC LLC at a Georgetown address of a residence once owned by Heiss, who hasn’t lived in D.C. for years.
An ABRA filing for Xereas is even more peculiar.
His certification to ABRA identifies him as a “Managing Member,” a status Dawson and Heiss stripped him of when they kicked him out of the comedy club back in 2012. And there is no signature for him, either.
Yet ABRA records show that Xereas still holds a 26 percent membership, with his name on the application for the liquor license issued to Riot Act DC LLC.
Then, on March 25, 2019, in an ABRA Renewal Application for a sidewalk cafe, Dawson identified both the licensee and the company as Riot Act DC LLC. (This contradicts a previous ABRA application from 2016 in which he states that the applicant is Riot Act DC LLC, “now known as Penn Social, LLC.”)
For purposes of that application, Dawson identified himself as Managing Member, and both Heiss and Xereas simply as Member.
Public postings are no less contradictory: An ABRA Notice of Public Hearing on December 20 identified the licensee as Riot Act DC LLC, while the sign in the window at Penn Social recently showed the licensee as Penn Social LLC, still classified as a multipurpose facility.)
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The tortured history behind Penn Social makes Dawson’s foray into “games of skill” seem even more brazen. And the D.C. government bureaucracy appears either confused, indifferent, or complicit and stuck trying to get its story straight.
On October 25, 2019, in response to a request from ABRA attorney Jonathan Berman, Deputy Attorney General Brian K. Flowers wrote that Dragon’s Ascent contains no element of chance and therefore is not a prohibited gambling device under District and federal law.
But Racine’s office is not interested in what’s behind the curtain at Penn Social; It referred all further questions to the respective licensing agencies.
A convenient deflection for the Alcohol and Beverage Control Board—which oversees ABRA and refers violations of the law to Racine’s office and other legal authorities for investigation and prosecution—has been to cite the litigation between Xereas and his former partners while allowing licensing irregularities and misrepresentations to go unaddressed.
In response to a petition last year by Xereas for a “qualifications investigation” into Dawson and his business scheme, the ABC Board wrote that it “finds no compelling reason in the public interest to intervene in a private dispute between the ownership of Penn Social.”
Meantime, The Dig has been making inquiries at ABRA over the last several weeks. Communications director Jared Powell says that ABRA procedure is to review liquor license applications and renewals by confirming with the Office of Planning and Office of Zoning that business addresses are not in residential-use districts, and with DCRA that a Certificate of Occupancy “is appropriate for the license type and class on the application.”
Powell confirmed that 801 E Street is zoned for commercial and large office space and said in an email that Riot Act was appropriately licensed back in 2011 as a theater that was eligible for a “Multipurpose CX license.”
“A multipurpose facility license is issued to legitimate theaters, universities, museums, conference centers, art galleries, facilities for the performance of sports, cultural, or tourism-related activities, and to indoor parks, buildings, and facilities that primarily serve as recreational playgrounds or workspaces,” Powell wrote—attaching a chart that showed Penn Social as the only sports bar among 45 establishments citywide that are operating with a “Multipurpose CX license.”
He said D.C. law requires review of all operating agreements before issuing a Certificate of Occupancy, but says ABRA relies on DCRA’s issuance of the certificate and therefore does not conduct its own inspection of those documents or any amendments to operating agreements.
The most recent Certificate of Occupancy issued by DCRA, on June 21, 2013, shows Penn Social LLC as the occupant, but operating as a theater with a bar area on the lower level and a ticket booth with a bar/restaurant on the ground floor.
“DCRA would be best able to answer your question regarding the designation on their document,” said Powell.
“There is no mandate to reflect a change of business purpose with a public filing,” said DCRA, regarding Penn Social’s conversion from comedy club to sports bar, which it says is based on “Articles of Amendment” that were approved by “members with majority interest.”
“Organizations have to follow their internal purpose, primarily their operating agreement, when their purpose changes,” DCRA said.
None of this explains ABRA’s issuance of the current liquor license—which is predicated on DCRA’s Certificate of Occupancy—to Riot Act LLC, which DCRA has re-named in its database as Penn Social LLC. And none of it authorizes a substantial change in business purpose at 801 E Street—certainly not one that all of Penn Social’s members have agreed to.
In fact, Section 25-401 of the ABRA regs, which state that an application for a liquor license or a renewal, or for approval of substantial changes in operation, requires “all of the members of a limited liability company” to sign a notarized statement certifying that the application is complete and accurate.
“All members must sign to amend the Operating Agreement.”
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Elizabeth Croydon’s testimony in January prompted Councilmember McDuffie to ask Moosally, the ABRA director, to respond to her “serious” allegations.
Pressed further by The Dig last month, Powell said that “Director Moosally has assigned the matter of determining if the establishment has the appropriate liquor license type to our enforcement division for investigation.”
A thorough, good faith investigation by ABRA—or any other appropriate oversight body or investigative agency—could have consequences for Dawson and Penn Social.
If nothing else, the whole debacle raises questions about the fairness of the regulation of liquor licenses from the perspective of establishments that maintain clean records and comply with the law.
It just might cause some to take exception to the bureaucratic cover that ABRA and DCRA have afforded Dawson and Penn Social.
And if Moosally’s review concludes that Dawson changed the name of the establishment from Riot Act to Penn Social, and re-branded a theater into a sports bar in violation of D.C. laws, Municipal Code and ABRA regulations, then D.C.’s first liquor establishment to offer games of skill for profit could have more to worry about than “Dragon’s Ascent.”
*Shortly after this story posted, Attorney General Racine told The Dig that his office will be looking into the Penn Social matter.
