FAMILY FEUD Lawrence R. Rachuba took his father -in-law's property development company to new heights. Then the family partnership unraveled.

Just a couple of years ago, he was a Baron of the Beltway. By early this year, he was nearly broke. "If Larry Rachuba's in trouble, who's safe?" was the refrain in real estate circles around town.

Lawrence R. Rachuba was a heavy hitter among local developers -- a man who took over one of metropolitan Baltimore's biggest development companies from his father-in-law, Ralph DeChiaro, and led it to even greater heights. He built Baltimore' County's glitziest hotel. And he took Towson Town Center from a dowdy also-ran and brought it into the front ranks of Baltimore-area malls.


In short, Larry Rachuba was about the last person anyone expected to see fighting to save his house from the auctioneer. But there it was. On July 18, just two days before his Howard County estate was scheduled to go on the block, Mr. Rachuba and his wife shooed the wolf from their door by filing for bankruptcy.

Just a simple story, really, say some longtime associates. No scandal, just a developer who made money for so many years he forgot he could lose it.


But with a network of properties as wide as Mr. Rachuba's, and with holdings so tightly intermingled with those of his in-laws, it couldn't be exactly simple.

There are lawsuits -- plenty of them. At U.S. Bankruptcy Court in Baltimore, 88 organizations, lawyers and others are on the mailing list for filings in the case. There are allegations from the DeChiaro Limited Partnership that Mr. Rachuba abused his authority as head of the two families' enterprises, in particular that he committed the DeChiaro family to backing Rachuba projects.

The DeChiaro suit carries a special irony. In effect, Mr. Rachuba is suing himself -- sort of. He owns 1 percent of the DeChiaro partnership, and his wife, Diane, owns 33 percent. Diane's sisters control the rest, the result of Mr. DeChiaro's early bequests, a form of estate planning, in the 1980s.

The DeChiaro partnership also forced two Rachuba ventures -- the Baltimore Travel Plaza, a gussied-up truck stop off Interstate in East Baltimore, and the Virginia Travel Plaza near Richmond -- into involuntary bankruptcy proceedings in November.

If it seems confusing, don't count on getting much explanation from the families. The Rachubas aren't talking, according to Lawrence Coppel, their bankruptcy attorney. They also didn't return calls to their home and his office.

One of the sisters, Carol Scheffenacker, declined to comment. The other sister, Roberta Hucek, didn't return calls seeking an interview. Most associates also didn't want to talk, and the legions of lawyers are mostly keeping quiet.

There may be less of a rift than the lawsuits seem to indicate, however. One source said the suits might have the effect of slowing down banks' pursuit of DeChiaro assets, which at least two banks tried to garnish earlier this year, by blaming the mess on the Rachubas while the couple are protected from creditors under Chapter 11 of the U.S. Bankruptcy Code.

The numbers are imposing. The debts listed in the Rachubas' bankruptcy filing come to more than $294 million, though that number is misleading because it includes the debts of partnerships the couple only partially owns.


How much their assets are worth isn't clear, since the filing only attempts to put a value on their personal assets -- and doesn't value the assets of Rachuba-backed partnerships that aren't in Chapter 11.

Behind it all is a man who his friend Gary Blucher, a 20-year employee who now has his own company, says didn't want to file for bankruptcy. And Mr. Blucher says his friend doesn't deserve all this grief.

"Larry Rachuba was and is a very respected man," Mr. Blucher said. "He got himself in a situation a lot of developers did -- he over-leveraged. Times went bad and he wasn't prepared."

Mr. Rachuba earned the respect he gained, associates say, but he clearly got a boost from Ralph DeChiaro.

Mr. DeChiaro came to Baltimore from New York decades ago, started building houses and just didn't stop building. He built well-known developments such as the Campus Hills section of Towson, Hilton hotels in Baltimore (now the Omni) and Annapolis, and the Towson Plaza shopping center. And he made a lot of money.

Along the way, Mr. DeChiaro, now nearly 80, had three daughters but no sons. All three daughters married, but Mr. Rachuba came into line to take over the family business. One of the other sons-in-law had an insurance business of his own and )) wasn't interested in development, and the other left after a stint at DeChiaro. Mr. Rachuba started out working on homebuilding crews in the early 1960s and worked his way up. In any event, the other two sisters' marriages ended in divorce.


"Larry was the only one with the intelligence, initiative and drive" it took to run the family business, Mr. Blucher said.

By the early 1970s, Mr. Rachuba was in charge, and there is no shortage of accomplishments to cite. "I changed the face of Towson," he told Baltimore magazine in 1985. "There were a lot of things proposed for Towson, but I'm the one who performed."

Indeed, the dowdy Towson Plaza shopping center he took over when he began to run the family company was transformed, and its name was changed to Towsontown Centre. Now it is becoming the expanded Towson Town Center.

The shopping center, probably the family's most visible project in decades, landed a major West Coast shopping mall developer as a partner in the expansion. It also landed a lease with a contact of the developer's, the upscale department store chain Nordstrom's. The Towson store will be Nordstrom's first in metropolitan Baltimore.

Even without Nordstrom's, the mall is a roaring success. Its overall sales per square foot handily outstrip national averages for malls its size, according to figures supplied by the DeChiaro-Rachuba Group in 1989.

Across Fairmount Avenue from the mall, Mr. Rachuba set out to build his signature local project. Along with partners John Childs and Norman Rockwell, neither of whom returned telephone calls seeking interviews for this story, Mr. Rachuba built the Sheraton Towson hotel and two office buildings. The buildings were the epitome of what Towson's business community wants the once-sleepy county seat to become -- a hybrid of city and suburb moving comfortably in the big time.


"Ralph [DeChiaro] was very impressed by what Larry was doing," said a source who has worked closely with both men. "He was doing big things in 1985, 1986, 1987." Baltimore Magazine was impressed, too, featuring him in a 1985 article as one of the "Barons of the Beltway."

Mr. Rachuba had been in charge of the company for years, but two sources said a change in the family situation changed his business position during the early to mid-1980s. Mr. DeChiaro, who had long since ceded day-to-day authority over the company, decided to divide the company among his daughters.

Under Mr. DeChiaro's plan, his family's companies were to do less and less development, concentrating instead on managing existing properties. But Mr. Rachuba wasn't ready to quit developing property, so he began to concentrate his development work through Rachuba Enterprises and other entities.

From his base in the Towson area, Mr. Rachuba expanded. By the time he filed for bankruptcy, he was involved in about 15

partnerships that held stakes in roughly 30 real estate projects, according to papers in bankruptcy court. Complete details aren't public, but the projects sprawl all over Maryland and beyond.

Local projects include Harford County land he has been developing into home lots and selling to the Ryland Group Inc. and other builders at a development called Thomas Run. Ryland reports that homes at that development have been selling well.


In Western Maryland, there's a development of town houses and building lots on Deep Creek Lake in Garrett County.

There are some apartments, including Piney Ridge apartments in Eldersburg. There's a small chunk of the Towson Town Center (most of the local share of that project belongs to his wife and sisters-in-law, and most if not all of the rest belongs to California-based investors), and a third of the Sheraton project, which also includes the office building and parking garage.

There were also four truck stops, three of them in the Baltimore area and one of them near King's Dominion amusement park north of Richmond, Va.

The biggest was Baltimore Travel Plaza, a project whose cost has been reported to be as high as $20 million or more. But when it went to a planned auction last year, the bidders ignored a suggested opening bid of $20 million. They started at $5 million and stopped at $12 million. Mr. Rachuba rejected the bid. At the time, the sellers said they planned to negotiate a higher price with potential buyers. No deal ever was made.

The travel plaza was supposed to be more than a truck stop. It was supposed to be an overnight stop for solo travelers and tour groups, who would stay at its 10-story, 175-room Quality Inn hotel and eat and be entertained at its dinner theater. A Roy Rogers restaurant, a nightclub, a service station and a Greyhound bus station rounded out the project. "They felt it was ideally located between New England and the Southern states," Mr. Blucher said.

It looked like a good idea at the time. The city thought enough of the idea to kick in some loan guarantees, and The Sun thought enough of it to write a laudatory editorial. But after it opened in 1987, it flopped.


"The problem came from overexpansion without proper management being in place," Mr. Blucher said. "We were a real estate development firm. We had never managed anything but apartments."

Two sources close to Mr. Rachuba said the travel plazas in Baltimore and in Virginia were among the biggest cash drains that pushed Mr. Rachuba to bankruptcy. The Baltimore plaza does decent business but is said to be saddled with a heavy debt load and some parts, such as the dinner theater, that don't carry their weight.

The Virginia plaza, originally bought at a bankruptcy sale, has been hampered by the opening of competing truck stops nearby.

Still, there was a good reason that the developer seemed to think the truck stop projects would work. He had made similar, if smaller, projects work before.

The travel plaza idea grew out of a partnership with Garth Davis, a former Howard County policeman who had a chance to tie up some land along Route 175 in Jessup and hit on the idea for a truck stop adjacent to the Maryland Wholesale Food Center. He searched for partners and was led to the DeChiaro-Rachuba Group. The result was the Truckers' Inn, which Mr. Blucher says was a hit. Mr. Davis later became a partner in the Virginia and Baltimore travel plazas as well.

"When Garth was running one facility, he could keep his eye on it and do it well," Mr. Blucher said. "With four facilities and hundreds of employees, he wasn't trained to do it."


Mr. Davis declined to comment, saying he had made an agreement with Mr. Rachuba not to speak publicly about their partnership.

The other project that seems to have been burning a big hole in Mr. Rachuba's pocket is the Sheraton, one of his company's crown jewels. Like the travel plaza, it suffered from a reach for grandeur that exceeded the project's economic grasp.

From the start, the hotel's food and beverage business did well while its room business lagged, said Bob Toubman, the hotel's former general manager. It also had fierce competition from such hotels as Marriott's Hunt Valley Inn for the regional corporate-meeting business that was central to its plans for success. And the hotel was, in a way, too good for its own good, Mr. Toubman said.

"The hotel was very expensive in terms of cost per room," Mr. Toubman said. "The rates that would have been necessary were far above the market rates in Baltimore County. The question is, what's going to give it the edge to let it lead the market by that much?"

Not enough, as it turned out. Mr. Toubman said room occupancy rates rose from the levels that were common around the opening, but not as quickly as investors might have hoped.

"In the first year and a half, they rose how I expected them to rise, but not even close to the levels needed to reach the pro forma estimates, which was money needed to make the project viable," he said.


The office space hasn't done much better. One of the two buildings is 92 percent full, the other only 52 percent full, according to Raymond C. Nichols, president of BSC Financial Group in Baltimore. A BSC subsidiary is the court-appointed receiver of Dulaney Valley Partnership, the entity that built the hotel and office buildings, as well as an adjacent parking garage.

The vacancy rate for office space in the core of Towson was 14 percent at the end of last year, according to a study by Manekin Corp.

At some point, Dulaney Valley Partnership fell behind on its debt. In November, Maryland National Bank successfully petitioned a Circuit Court judge in Baltimore County to appoint one of Mr. Nichols' companies as receiver. The cost of the project was reported in 1985 at $55 million.

According to the Rachubas' bankruptcy filing, Maryland National had made at least $11.8 million in loans to the partnership. The filing also notes a $43 million loan from Maryland National described as a "loan to Lawrence Rachuba and others; guaranteed by Diane Rachuba."

Mr. Nichols said the food and beverage business at the hotel is still strong and that the room business is still weak. Average room occupancy is about 60 percent, he said. He said that W.C. Pinkard & Co., the leasing agent for the office space, has six proposals out to prospective tenants to ease the office glut, and that he expects the office buildings' occupancy to rise dramatically within weeks.

The receiver won't confirm that cash flow from the project can't meet its debt but notes that "there's obviously been some sort of problem or everyone would have been getting paid." But he said the project is viable except for its debt structure.


"My instinct is that without the debt service, it's paying its way," he said. "This is not one huge white monster like you see around the country."

There have been rumors in real estate circles about Mr. Rachuba's financial struggles all year, rumors that were confirmed by the July bankruptcy filing.

The reorganization of family interests that had occurred when Mr. DeChiaro split up his partnership holdings among his daughters proved telling, said a source close to the family who asked not to be identified.

When the real estate dip hit, the DeChiaro partnership wasn't hit XTC as hard by losses on its piece of projects such as the Virginia Travel Plaza, because Mr. Rachuba's wife and sisters-in-law had a bigger stable of income properties.

"The income-producing properties were mainly owned by the DeChiaros," the source said. "Larry had some income properties, but they were new and they weren't really doing much."

The march toward bankruptcy court began in earnest in January, when 1st American Bank sent Mr. Rachuba a letter demanding payment of a $4.4 million loan that he and his wife had guaranteed in 1988. Mr. Rachuba didn't pay. In April, the bank accelerated the payment terms under the personal guarantees in the contract. Mr. Rachuba still didn't pay off the note, though he did make a $167,000 payment in the spring.


Mr. Rachuba's rising problems prompted him to step aside in May as head partner of DeChiaro Limited Partnership, which he had in effect run for his wife and sisters-in-law. But problems with lawsuits were still mounting, and affecting Mr. Rachuba's sisters-in-law.

May was a bad month all around. On May 4, 1st American entered a judgment in Baltimore County against the Rachubas for more than $4.7 million. First American soon set out to enforce its judgment through garnishments and by going after the Rachubas' house.

Signet Bank of Maryland was also trying to garnishee the family's assets to satisfy a judgment of almost $9 million, and soon cast its sights on assets of the sisters-in-law. Carol Scheffenacker fought back by denying in court papers that she knowingly allowed Mr. Rachuba to pledge her assets to secure what she contended were Mr. Rachuba's private debts, a charge the DeChiaro side of the family has repeated in other lawsuits.

Back on the 1st American front, the battle over the house continued until days before a planned July 20 auction, when documents filed in Howard County seemed to indicate that the Rachubas and 1st American planned to work out a deal. But no deal came to pass, and the Rachubas filed for protection from creditors under Chapter 11 of the bankruptcy code.

Mr. Rachuba was allowed to continue to run his real estate holdings as a debtor-in-possession, rather than cede control to a court-appointed trustee. The couple has not yet filed a reorganization plan that will tell how they plan to pay their debts, which range from $150 for a credit card bill to a share of a loan of more than $50 million for the expansion of Towson Town Center.



1.Towson Town Center. Dulaney Valley Road,Joppa Road and Fairmount Ave.,Towson*2.Sheraton Towson & Dulaney Center offices(adjacent);Dulaney Valley and Fairmount3.Baltimore Travel Plaza, O'Donnell St. and Route 95 Balto.Baltimore Port Truck Plaza is nearby.4.Thomas Run; land development project near Bel Air,Harford Co.5.Waterside at Wisp; lots and townhouses at Deep Creek Lake,Garrett County6.Piney Ridge Apartments, Eldersburg, Carroll County*Locally-owned share of the project mostly held by DeChiaro side of the family, but the mall's expansion was guided by Mr. Rachuba when he was general partner of the DeChiaro Limited Partnership.