Velvet Rope owner Frank Elliott the morning of the June 3, 2012 fire. Elliot was arrested Friday and charged with arson and insurance fraud. Photo: Jennifer Wolfe

Police arrested the owner of the former Velvet Rope Ultra Lounge Friday night and charged him with two counts of arson and one count of insurance fraud, the Village of Oak Park reported.

Frank Elliott, 26, was arrested at another bar he had opened subsequent to the Oak Park fire. The arrest was made at the Bonsai Bar at 3503 N. Halsted St, Chicago.

The Velvet Rope, 728 Lake St, was destroyed by fire in the early morning of June 3, 2012 and never reopened. At the time, Elliott said he thought the bar was targeted because it catered to a gay clientele. He said he found anti-gay messages scrawled on the walls inside the burned building and told reporters he believed the fire was a hate crime.

Oak Park fire personnel responded to reports of smoke around 6:30 a.m. The fire was extinguished in minutes, according to David Powers, a spokesman for the village of Oak Park. The Flat Top Grill and Geppetto’s Toy Box, two adjacent businesses, also sustained water and fire damage that required them to close for months. No injuries were reported.

As Elliott’s narrative that the fire was the result of a hate crime spread, Oak Park and Chicago’s gay community offered support for Elliott and Velvet Rope employees. A benefit charging $20 per person was held at the Hideaway Bar in Forest Park.

But local investigators determined there was probable cause to indicate arson, and state investigators were called in.

Elliott’s financial problems were exposed after Ellen Bettenhausen, a previous owner of the establishment and a lender in a 2008 promissory note, sued in August 2012 for breach of contract when Elliot failed to make payments on the note. He was also sued by U.S. Foodservice Inc. a wholesale food vendor for restaurant supply bills that weren’t paid.

The owner of the Lake Street building, Mike Fox, of R.P. Fox and Associates, remodeled the building with insurance money. It has since been rented by Spiro Papageorge, who formerly owned Papaspiros across the street. Papageorge hopes to open a similar Greek restaurant at the location.

Oak Park Police Chief Rick C. Tanksley said investigators worked closely with the Office of Cook County State’s Attorney to pursue the case for more than a year.

“This incident was a troubling one for our community, which prides itself on being open and welcoming to all. A hate crime just didn’t make sense,” Tanksley said in a statement released by village hall.

Elliott was transported to Cook County Criminal Court at 26th and California, where he is awaiting a bond hearing scheduled Saturday.

If convicted, Elliott could face up to seven years in prison for each count of arson and 15 years for insurance fraud, in addition to fines of $25,000 or more, Powers said.

This story has been updated to correct the spelling of Frank Elliott’s name.

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