Western Development Corp., the giant Washington-based developer whose projects include the Potomac Mills shopping mall, failed to meet its regular payroll Monday, sources said.

Paychecks went out to employees Tuesday afternoon, after banks had closed and it was too late to deposit the checks, sources said. Workers at Western's headquarters at Washington Harbour in Georgetown were given no explanation for the delay, the sources said.

Western issued a two-sentence statement Tuesday by company spokeswoman Patience O'Connor: "Of course everyone at Western has been paid. We don't understand what the inquiry is for." Company officials declined to answer questions about the payroll Tuesday and yesterday.

Western employs about 175 people at Washington Harbour. One source said that several employees were laid off this week and that others were laid off earlier this year.

Western, which is led by Herbert S. Miller, has been a pioneer in the development of discount shopping malls. J.C. Penney has told Western that it wants to open a store at Potomac Mills, but a planned expansion of the mall has been delayed because Western has been unable to secure financing.

Western tried unsuccessfully Monday to persuade Citicorp, one of its major lenders, to wire money to its bank account to enable the company to issue paychecks, sources said.

Western has had problems paying bills connected to a real estate project it developed in Milwaukee, according to a report in the Washington Business Journal earlier this year. The newspaper said a Western partnership owed Milwaukee County about $2.2 million in property taxes, interest and penalties. In addition, the report said the property faced possible foreclosure action by NCNB Texas National Bank. The bank filed a lawsuit, asking that the property be sold to pay off loans of $16.5 million, the newspaper said.

Besides Potomac Mills, Western has developed Franklin Mills outside of Philadelphia and Sawgrass Mills in Broward County, Fla. It is scheduled to open another discount mall in Illinois next year. In the District, Western's most conspicuous creations are the Georgetown Park shopping mall and Washington Harbour. Western is currently building The Portals, a major office and hotel complex at the D.C. end of the 14th Street Bridge.

A partnership led by Western is developing The Portals under an elaborate agreement with the D.C. government. The partnership won the right to purchase The Portals property, a city redevelopment site, in a contentious public competition.