(Reporter's note: Circuit owner Mike Macharello initially alleged in a Facebook post that Sterling Properties, his landlord, raised the rent at Circuit Nightclub. In an interview with Windy City Times immediately following those statements, Macharello conceded that his comments had been inaccurate. On Feb. 7, 2013, Macharello wrote to Windy City Times and further retracted his statements. His retraction has been published in full below.)
Circuit nightclub owner Mike Macharello has announced that the business will not reopen, after an apparent split between management and financial troubles.
Macharello announced the closure via BOI Magazine, which he publishes, but the reasons behind the split remain unclear.
"The business has been difficult on the both of us, and we got through the worst of times together," said Macharello in the statement. "I always wish Patrick [Harms, co-owner] the best."
The statement notes that Harms is open to the possibility of launching a new club at Circuit's former home.
Macharello's announcement comes after the club ceased operation unexpectedly earlier this month and its website was taken over by creditors. BOI Magazine's website was also seized.
Macharello had stated that the closure was temporary and that Circuit would reopen after he renegotiated Circuit's increasingly expensive lease. But co-owner Patrick Harms refuted that version of events, stating that the rent had not been raised and that Macharello pulled his business licenses from the premise.
Macharello and Harms had been managing operations at Circuit together. Harms held the lease to the property, located at 3641 N. Halsted St., while Macharello owned the business licenses.
Macharello alleges that he saw money problems, which Harms had been charged with handling, and became increasingly concerned about the business (Harms could not be reached for follow-up comment). To protect the business, Macharello said, he removed the business licenses every night.
On Halloween, he removed the licenses.
The next day, he said, "we got locked out."
Macharello claims that Sterling Properties, which manages the building, locked them out over back rent that Harms had failed to pay.
Frank Friedman of Sterling Properties called Macharello's statements "erroneous."
Macharello had initially posted on Circuit's Facebook page that Sterling had been raising the rent by thousands, a statement that both Harms and Friedman said was false. Macharello later told Windy City Times that he had simply wanted a rental reduction and had been unable to negotiate it. He conceded that the rental cost was his responsibility as owner but that he had hoped for help in a tough economy.
Friedman said that Circuit had closed not because of Sterling Properties, but because of Macharello.
"Mike removed the business licenses," he said. "Circuit could not operate without a business license."
Cut off from his source of income, Macharello said, one of his investors closed in and seized the websites. That investor was Jeffrey Binninger, President of Investure Corp. Binninger took control of Macharello's websites, he confirmed.
Macharello alleges that he believed the BOI Magazine website had wrongly been seized, as the magazine and the club are two different companies.
Not so, said Binninger.
"BOI magazine is just as much included as Circuit," Binninger said. "He signed a security agreement that pledged all of the assets that he had."
Binninger declined to say how much money Macharello owes but said that the number is in the six figures.
Binninger said that Harms had been trying to pay down the club's debts until Macharello, unhappy with the club's direction, went into the club Oct. 31 and took his licenses.
Both Macharello and Binninger said that Macharello had been unhappy with the direction of Circuit, which had been increasingly branding itself as a Latin club.
Macharello loved hosting Latin events, but he envisioned a club that would embrace the full diversity of Chicago's LGBT community in addition. He wanted to host other themed night, too, targeted at different segments of the community.
The disagreement over the club's direction appears to have spurred some of the tension between Harms and Macharello, although Macharello said he still considers Harms a good friend.
After Macharello took the licenses, however, the split became clear.
"Patrick has the venue but doesn't have the licenses," said Binninger.
Consequently, Investure moved in on Macharello.
Both BOI magazine and Circuit's websites were hosted on Contax Communications Corporation servers, another company owned by Binninger. Binninger shut down the websites, and visitors have been greeted with blank screens and a message noting the seizures since.
Macharello skirted the seizures by launching new websites for both Circuit and BOI Magazine, and he has vowed to continue publishing.
Macharello also held Circuit parties in in other locations. Noche Latina was held at 1675 N. Elston Sunday night, and Macharello hosted ExtravaGanza at Evergreen Club Saturday.
But Binninger said that legal proceedings against Macharello are in the works and that those impact BOI in addition to Macharello's other assets.
"He's under the illusion that everything is going to be fine," said Binninger. "He's so far over his head that the only way he is going to get out is to win the lotto."
Statement from Mike Macharello:
For Immediate Release
From Mike Macharello
I would like to retract and clarify a statement I made that the landlord of Circuit "raised the rent by thousands of dollars." It was erroneous on my part to either state of infer that Frank Friedman and Sterling properties raised the rent any more than was commensurable with current area market and times. It was further erroneous to either state or infer that this was the cause of the closing but rather that the closing was caused by many factors, many of which included a depressed economy. While most consumers these days are looking for bargains and cheaper prices, the fact is that supplies, inventory, utilities, taxes, licenses, payroll and other costs associated with doing business, all continue to rise. For most businesses it's a challenge to bridge the gap between rising costs and offering competitive prices to their customers. Circuit was no exception. However, throughout my 15 year relationship with Sterling, Frank has always done his utmost to work with me and my colleagues in order to perpetuate Circuit nightclub. I would like to take this opportunity to apologize If I have said or inferred anything which was looked on as detrimental to Frank Friedman and/or Sterling Properties.