Aron's Record Cuts 2 Ways
By Charles Babington
Ruthann Aron, of Potomac, is basing her U.S. Senate campaign on her record as a developer, telling voters in a television commercial: "I'm not a career politician, I'm a businesswoman."
Her supporters and detractors alike will find ample ammunition in that record. It includes some profitable real estate ventures in the Washington suburbs, but it also includes three costly lawsuits that Aron lost or paid to settle.
In two of those cases, civil juries returned verdicts of fraud, breach of contract or other counts against Aron and her companies and directed her to pay many thousands of dollars in compensatory and punitive damages to former business partners. A federal judge rejected one of the verdicts, and the lawsuits were settled after Aron agreed to pay about $175,000 in each case.
Aron, a Montgomery County Republican vying for the Sept. 13 primary nomination to challenge Democratic Sen. Paul S. Sarbanes, said voters should not be alarmed by the juries' findings.
"I'm not happy to have lawsuits, but I'm happy to stand up and fight for what I believe is right," said Aron, a member of the Montgomery County Planning Board who became a developer in the 1980s.
She said that business associates sometimes tried to take advantage of her because she is female.
"Being a woman and a developer, alone in a man's world, is a very, very tough business," Aron said. "As a woman, you have to work twice as hard and get put to tests that are unnecessary and unfortunate." She declined to go into details, saying she did not want to reopen old cases.
Aron said seven of her real estate projects were successfully completed during her decade-long development career, which now is on hold while she runs for office. The fact that she suffered setbacks in three civil trials during that time, she said, merely reflects the rough-and-tumble nature of the property development industry and her willingness to fight hard.
"I fought for myself," she said. "And I would do it again. You don't always win when you're right."
Aron, 51, is considered an underdog in the battle for the GOP nomination against front-runner William E. Brock III, a former senator from Tennessee who also was U.S. labor secretary.
Aron has demonstrated respectable fund-raising ability, however, collecting $239,000 through March, of which $103,000 came from her own pocket. More recently, she drew about 100 people to a May 10 campaign fund-raiser in Potomac, where tickets were $250 and $500 each and Sen. Alfonse M. D'Amato (R-N.Y.) was the speaker.
Aron entered Catholic University's law school in 1976, at age 33. By then she had helped her husband, physician Barry Aron, establish his urology practice and their children were aged 6 and 4.
She was admitted to the Maryland bar in 1980, and began working for a zoning hearing examiner in Montgomery County. "I got bitten by the bug of zoning and land use," Aron said. She turned her full attention to real estate development in 1983.
During the next few years, Aron worked with a series of partners to develop small-to-medium-sized commercial and residential projects in Montgomery and Prince George's counties. Her typical role was to find a piece of property, devise a plan for buying and developing it, and then seek partners to help arrange financing and see it to completion.
Although three of her partnerships ended in court battles, some former associates said they enjoyed working with Aron.
"She could perceive a good piece of real estate and its potential early on, which is a real talent," said Daniel Colton, a Prince George's-based developer. "She had an ability to get along with the property owners, to get them to agree to sell the property on good terms."
Colton teamed up with Aron in the late 1980s to develop a nine-acre site in Gaithersburg that now has about 80 three-story town houses, which have sold for about $170,000 each. The property had been zoned for commercial use, but Aron persuaded Montgomery County officials to rezone it for residential use. She sold her interest before the town houses were built, and Colton said the project was profitable for both of them.
Aron's biggest problems arose from partnerships that sometimes relied on oral or handshake agreements that led to bitter disagreements.
The first such case began in 1984, when Aron obtained an option to buy the Woodley Gardens Shopping Center in Rockville, now home to the Hard Times Cafe and other businesses. Given 60 days to secure loans for the $1 million purchase price, she began lining up potential partners and new tenants.
At the same time, according to documents filed in Montgomery Circuit Court, Aron began talking with two area businessmen who make real estate loans. The three agreed to work together on projects in which Aron would do most of the work and the lending companies would provide the money. The two men would later testify that the shopping center was to be one of their joint efforts, but Aron claimed the men had shown no interest in it.
In December 1984, the two lenders sued Aron, accusing her and her company, Development Research Inc., of fraud and breach of contract. They said Aron had sold the right to buy the shopping center for $200,000 and had kept the money herself rather than share it with them. They said their companies had already begun pumping money into the three-way partnership.
Aron countersued, saying that the $200,000 was rightfully hers because the two businessmen had refused to help her finance the shopping center deal. She alleged in documents that the men had "attempted to coerce" her into giving them a large share of the project's value. Her inability to obtain loans to buy the shopping center, she said in an affidavit, "placed me under extreme financial as well as mental and emotional stress."
A Montgomery civil jury heard the case and returned a verdict of fraud and breach of contract against Aron. The jury directed her to pay $154,606 in compensatory damages, plus $82,000 in punitive damages, to the two businessmen's companies. A judge reduced the punitive damages to $20,000.
Aron said she decided to pay the damages, totaling $174,606, rather than appeal the case and "pay thousands of dollars for a new trial."
Arthur Kahn, a lawyer for the two lenders, said his clients then agreed to have the judge vacate the jury's verdict, meaning the lawsuit's final record would not reflect the judgment against Aron.
Another dispute began in 1986, when Aron and some partners formed Clinton Joint Venture to buy and develop 17 acres of land near Andrews Air Force Base in Prince George's County. The group obtained an $800,000 loan from a venture capital company headed by Julian M. Seidel, the former president of the failed First Maryland Savings and Loan. Seidel began serving a 12-year prison term in 1989 for conspiring to defraud the thrift's depositors.
Following a dispute between Aron's group and Seidel's firm, which was unrelated to the S&L, Clinton Joint Venture sold the 17-acre tract for a profit exceeding $1 million, according to court records. Seidel's firm, which went into bankruptcy in 1988, sued the Clinton group, saying the money should have been split 50-50.
After a three-day trial in October 1990, in which Aron and Seidel testified, a federal jury in Alexandria returned a verdict in Seidel's favor. The jury concluded that Clinton Joint Venture and its principal owners, Aron and developer Walter C. Minerbi, should pay Seidel's group $700,000 in compensatory damages and $210,000 in punitive damages.
A federal judge set aside the verdict, in part because he disputed the credibility of Seidel, who was in prison at the time of his testimony. Rather than undergo a new trial, Aron said, she and Minerbi agreed to pay $175,000 each to settle the suit. Minerbi declined to comment on the case or his dealings with Aron.
Aron says she felt vindicated by the judge's action, even though she paid to settle the dispute. "We believed we were right, but we didn't want to continue our lives paying the lawyers," she said.
Before the Alexandria trial, Aron sued Minerbi in D.C. Superior Court, alleging fraud. She said Minerbi had taken an unfair share of the assets when the two dissolved a partnership that was separate from Clinton Joint Venture. A judge heard the case in 1989 and ruled in Minerbi's favor, ordering Aron to pay Minerbi's court costs. Aron contested the court-cost ruling and said she wound up paying Minerbi nothing.
Aron's main source of income now is the $18,500 a year she makes as a Montgomery Planning Board member. But she and her husband have significant wealth, according to financial disclosure statements she has filed with the Senate and the State of Maryland.
Their home in Potomac is worth $586,900, according to Montgomery tax records. They own an apartment in South Palm Beach, Fla., which cost $130,000 in 1984. They also own half interest in a three-acre plot in Prince George's County that cost $461,360 in 1988.
Barry Aron's assets in his medical practice's profit-sharing plan exceed $500,000. The couple have numerous stock and bond holdings, including IBM stock worth more than $100,000; municipal bonds sold by the town of Frederick, Md., worth more than $100,000; and two U.S. Treasury notes worth more than $250,000 each. As a family, the Arons also hold numerous stock mutual fund accounts, some of which are valued at more than $100,000 each.
Looking back on her court cases, Aron said: "I've been in three lawsuits in 12 or 14 years ... in a business that is notoriously litigious... . I doubt that even in the United States Senate I would win them all."
Staff writers Sharon Walsh and Bill Miller and researcher Bridget Roeber contributed to this report.
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