Lawrence R. Rachuba ran his in-laws' business for years, building a real estate empire. But, when the real estate market fell into a slump, Rachuba's own projects began to crumble. Now the family trust he operated is trying to distance itself from his financial troubles.
The DeChiaro Limited Partnership is a trust that was created to benefit Rachuba's wife, Diane, her sisters Carol Scheffenacker and Roberta Hucek, and the grandchildren of Ralph and Dorothy DeChiaro. Lawrence Rachuba resigned as general partner of DeChiaro last spring.
The trust is fighting to keep its financial stability following the bankruptcy filing of Lawrence and Diane Rachuba. The couple filed for Chapter 11 reorganization in July for themselves and their corporation, Rachuba Enterprises Inc. (REI).
The Rachubas listed REI's assets at about $42 million and liabilities at $41.9 million.
The DeChiaro trust is the creditor for several development projects built by Rachuba and various partners. Through the various partnerships, Rachuba and his wife have developed the Sheraton Hotel in Towson, Dulaney Plaza Shopping Center and Dulaney Valley Garden Apartments. The couple also own a horse-breeding farm.
In a recent development, DeChiaro is fighting off a move by Provident Bank to force the trust to repay a $1 million loan that Rachuba secured from the bank while serving as general partner, according to records filed in bankruptcy court. Attorneys for DeChiaro have claimed in a countersuit against Provident that Rachuba signed for the loan on behalf of the trust without proper authority.
The Rachubas could not be reached for comment. Their attorney, Lawrence D. Coppel, did not return telephone calls.
In another matter, DeChiaro is trying to force the Baltimore Travel Plaza Limited Partnership and the Virginia Travel Plaza Limited Partnership into bankruptcy. Both partnerships are controlled by Rachuba and another partner, Garth Davis.
Acting on behalf of DeChiaro, attorney Lawrence J. Yumkas filed what is called an involuntary bankruptcy, which in effect petitions the U.S. Bankruptcy Court to put the two partnerships under the protection of the bankruptcy court.
The partnerships developed the Baltimore Travel Plaza located at Interstate 95 and O'Donnell Street in southeast Baltimore and Virginia Travel Plaza located on Interstate 95 in Doswell, Va.
Yumkas said the filing of the involuntary bankruptcy was a strategic move because the electric company in Virginia was about to shut off power to the Virginia Travel Plaza.
Because DcChiaro is a creditor of both travel plazas, Yumkas said the bankruptcy petition was in the trust's best interest.
In fact, DeChiaro filed for the Chapter 11 reorganization on behalf of the partnerships the same day the electric company was to shut off the power.
"Talk about close to the wire," Yumkas said.
As a precautionary measure and to defend the Baltimore Travel Plaza from lawsuits from its creditors, Yumkas said, DeChiaro decided to seek bankruptcy protection for it as well.
"Baltimore Travel Plaza is not in an emergency situation like Virginia was," he said.
DeChiaro was able to file for the bankruptcy protection because both of the general partners, Rachuba and Davis, have filed for personal bankruptcy. Davis filed for Chapter 7 liquidation last June.
The Baltimore Travel Plaza is a 14-acre tourism center with two restaurants, a service station, a hotel and a nightclub.
"As a result of these filings, all of the facilities will continue in operation and will remain open for business as usual," DeChiaro said in a press release.
This week, DeChiaro was back in bankruptcy court trying to free itself from the $1 million obligation.
In 1988 Rachuba applied for a $1 million line of credit from Provident, which the bank approved the same year. While serving as general partner of the DeChiaro trust, Rachuba signed for the line of credit using the trust to secure the loan, Yumkas said Monday during oral arguments before U.S. Bankruptcy Judge James F. Schneider.
Rachuba borrowed the full amount to help fund two Harford County development projects undertaken by REI, said Yumkas, who is with the law firm of Blum, Yumkas, Mailman, Gutman & Denick.
One project, Thomas Run, when developed would consist of 530 single family townhouses. The second project involves the purchase of land that would be developed.
The loan went into default when the Rachubas filed for Chapter 11 protection. Since DeChiaro backed the loan, Provident went after the trust for repayment of the $1 million.
The bank sought relief through Baltimore County Circuit Court, but because the Rachubas filed for Chapter 11 protection, the case was sent to federal court.
In return, DeChiaro filed a countersuit against Provident objecting to the way the loan was obtained. The case remains unresolved because Schneider remanded the case back to Circuit Court, saying that he had no jurisdiction to hear the case since it only indirectly affected the Rachubas' bankruptcy petitions.
Jack L. B. Gohn, an attorney representing Provident, refused to comment on the case.
In the countersuit, DeChiaro claims Provident knew the money was not intended to be used by the trust but rather for REI's development projects in Harford County. DeChiaro said in its suit that Rachuba wrongfully obtained the loan from Provident.
Yumkas argued that members of the trust had no knowledge of the $1 million line of credit, which was never used for DeChiaro's benefit, and therefore the trust shouldn't be liable for it.
In fact, Yumkas said during his arguments that Provident collaborated with Lawrence Rachuba to have the DeChiaro trust back the loan because REI was not financially sound enough to secure the line of credit on its own.
"It was a scheme to use DeChiaro's good credit and good faith to get the loan through," Yumkas told Schneider.