Dispute seen as factor in bankruptcy filingA...


Dispute seen as factor in bankruptcy filing

A fight with H&S; Bakery Inc. chief John Paterakis apparently was the straw that forced developer Michael Silver to file for protection from creditors under Chapter 11 of the U.S. Bankruptcy Code last month.

Mr. Silver's biggest liability was a $250,000 judgment that a partnership controlled by Mr. Paterakis' family won last year in a lawsuit related to a soured downtown land deal.

Mr. Silver is best known for owning land near the Inner Harbor where he hoped to build a shopping mall in the mid-1980s. Unable to keep up with the pre-development costs on the project, Mr. Silver later turned over the land to Mr. Paterakis, who had lent Mr. Silver more than $10 million in a bid to help Mr. Silver hold on to the land.

Mr. Silver's attorney, Harry L. Chase, declined to comment.

Mr. Silver agreed to buy the disputed land, now part of the site of the Inner Harbor East mixed-use project proposed by the Paterakis family and Gilbane Corp., from Consolidated Rail Corp. in 1984. But before he closed the deal, he agreed to sell the land to a Paterakis-backed partnership, Harbor East L.P., according to the suit it filed against Mr. Silver.

When Mr. Silver could not meet the original deadline for settling with Conrail, he couldn't sell the land to Harbor East. Conrail gave him more time to settle on the disputed parcel -- but attached the condition that Mr. Silver also buy other property.

Mr. Silver was accused of obtaining one letter from Conrail outlining the real agreement and another version that didn't mention the conditions to show the Paterakis family, encouraging them to think there was no problem with their deal.

In the end, Conrail refused to sell Mr. Silver the parcel. Harbor East then had to pay Conrail more for the land than it had agreed to pay Mr. Silver, and sued Mr. Silver successfully for breach of contract and negligence.

DeChiaros battle Provident Bank

Those busy DeChiaro family lawyers have another Baltimore County court date with a bank Oct. 13, when the family's battle with Provident Bank of Maryland is set for trial.

Baltimore County Circuit Judge John Fader II is to sign an order today denying motions from both sides for summary judgment, or a ruling in essence that the case is so clear cut that they should win without a trial. The best guess is that the trial will last two days, after two years of pre-trial motions and machinations.

Two related lawsuits, one filed by Provident in 1990 and the other filed by the DeChiaro family against Provident last year, grew out of the same financial strains within the clan of retired developer Ralph DeChiaro that has spawned a court fight with Maryland National Bank.

Both banks are accused of illegally allowing developer Lawrence Rachuba, Mr. DeChiaro's son-in-law, to pledge DeChiaro family trust assets as collateral for loans that benefited Rachuba-owned businesses in which the trust had no interest.

Mr. DeChiaro put DeChiaro L.P., a partnership that held most of his assets, into trusts for his three daughters more than 20 years ago. The trusts' assets, by law, can't be invested or otherwise risked in the business affairs of the trusts' managers or beneficiaries unless the trusts themselves stands to gain.

Such trusts are called spendthrift trusts because they are designed to protect an original family fortune from mistakes heirs make with their own money.

The Provident suit turns on a $1 million loan to DeChiaro L.P. that Mr. Rachuba used to help with Thomas Run, a town house community Mr. Rachuba's Rachuba Enterprises Inc. was developing, and Pistorio, an REI-backed land deal. Both projects are in Harford County.

Provident wants DeChiaro L.P. to repay the $1 million, plus interest and penalties. The DeChiaro family contends that Provident knew Mr. Rachuba didn't have the authority to pledge trust assets for REI deals.

Provident, in court papers, has contended that what it called "inter-company loans" within the DeChiaro-Rachuba family's group of companies were common. The bank said the $1 million did benefit DeChiaro L.P. and the trust.

A typical excerpt from a Provident argument sums up the tone of the case file: "Nary a peep in protest . . . was ever heard from anyone connected with [DeChiaro] L.P. until the DeChiaro-Rachuba empire began to crumble."

Kramon & Graham's move irks brokers

Tongues were wagging after the news broke that the law firm of Kramon & Graham is moving to Commerce Place, the $90 million tower at Redwood and South streets that a partnership led by New York-based Harlan Co. is slated to open late this year.

Turns out that managing partner James Kramon is developer Leonard Harlan's brother-in-law. And the grumbling around town is that the relationship played an unfair role in Mr. Kramon's choosing the new building. "Everyone knew where he was going," one broker said.

Mr. Kramon, unsurprisingly, doesn't like those suggestions. "Every one of our 10 partners chose that building because of what it is," he said. "It [the family tie] was not a factor. Straight out, it was not a factor."

Mr. Kramon said the firm made offers to two other buildings -- the USF&G; Tower and 100 E. Pratt St. -- where it would have moved had the owners accepted its terms.

"There are some very unkind things being said in this very desperate market," Mr. Kramon said.

* For a roundup of commercial real estate leasing activity in Maryland, see Page 14B.

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