Former Philly restaurateur/political operative joins State Department

The State Department has appointed Gladwyne-based political consultant and former Waterworks restaurant owner Michael Karloutsos to a high-profile administrative position.

The appointment, first reported in the Greco-American news outlet National Herald, took effect on July 23. Karloutsos will serve as acting deputy chief of protocol after receiving a personal recommendation from then White House chief of staff Reince Priebus before his ouster last week.

“The Protocol Office overall serves essentially as the first line of defense in diplomacy for the United Stated of America. They call it ‘the first hand of diplomacy,’” Karloutsos said of his new position in an interview with the National Herald. “We establish the protocol between the United States of America and every other government around the world with which we engage.”

While the Greek American Karloutsos has extensive ties to religious figures in his ancestral homeland, his background is largely centered around local political consulting and international business, not diplomacy. 

His political connections grew after he relocated from New York City to serve under former Philadelphia schools czar Paul Vallas in 2002. Karloutsos had worked on Vallas' failed gubernatorial bid and had seperately promoted school choice initiatives through his agency, MAK Consulting. Vallas would put the consultant in charge of leveraging corporate donations on behalf of the School District. He became known among the city’s political elite for hosting swank fundraisers on behalf of figures like then-Councilman Michael Nutter, who would later become mayor. His wife, Anastasia, would later consult for the scandal-plagued Delaware Valley High School, a correctional academy.

But Karloutsos would become best known in Philadelphia for his time at the helm of the troubled Waterworks restaurant, which he reopened in 2006. An upscale eatery that aimed to draw foot traffic to an iconic neoclassical pumping station next to the Philadelphia Museum of Art, the venture would end in failure and scandal.

Karloutsos, who had never previously worked in the dining industry, said he was brought in to clear out the bureaucratic and political obstacles to making his vision of a waterfront restaurant a reality. But others said he was selected for the plum opportunity – selling high-priced plates next to one of the city’s biggest tourist attractions – precisely because of his political connections.

The deal was years in the making, and Karloutsos used publicity stunts to draw attention to the out-of-the way venue, pulling in appearances from ex-Eagle Donovan McNabb, “Rocky” actor Sly Stallone, and circulating a story that Donald Trump had demanded that his personal spring water brand be added to the restaurant’s bottled “water bar.” 

Karloutsos’ shrewdest move as a restaurateur was a peculiar deal, revealed by the Daily News, that had the city government pick up Waterworks’ enormous utility bills while the establishment skipped out on local taxes. The tab, which also included free utilities at a cafe and catering business also operated by Karloutsos, totaled hundreds of thousands of dollars and spanned six years. 

Karloutsos said he had simply never been billed, but his brother-in-law would eventually plead guilty to skimming funds. A lawsuit filed by another part-owner outlined how the restaurant was failing to cough up business taxes.

The business, which garnered mediocre reviews from food critics, ultimately fizzled. Karloutsos converted the space into a catering venue in 2015 and later cut ties with the operation. He returned to consulting and recently hosted a weekly talk show on New York radio station WNYE. 

The Trump administration has come under fire for its failure to fill numerous diplomatic vacancies at the State Department. Karloutsos, who did not respond to several requests for comment, previously pointed to his political work and attendance at a meeting between Pope Francis and Greek-Orthodox Ecumenical Patriarch Bartholomew in 2014 to explain his selection.

“I think all those things serve as preparation for me to assume the position at this time,” he said. “I thank God I that have good friends within the Administration who saw the work that I have done and they felt I was ready to assume that job.”