Four months after George Shelton's Marketbasket grocery store opened in a Capitol Hill building abandoned by the A&P food chain, he was known for doubling profits and overcoming competition from another chain store that had bested the supermarket giant.

With this track record, the opening of Shelton's second store two years later in 1980 was welcomed as another successful example of the ability of a small entrepreneur. The event was marked by speeches, balloons and the appearance of politicians.

But last week, Shelton, a Pittsburgh native who chose business over the family pharmacy trade, was forced to close his chops, the victim of a poor accounting system and a change in neighborhood buying habits.

"I'm unhappy, I'm angry, I'm frustrated," Shelton said. "I just feel I'm too damn smart to be in this position."

In the last four years, Shelton's Marketbasket had become such a fixture in the neighborhood that real estate agents would say, "'The Metro is six blocks away, Shelton's is three blocks away; would you like to see the house?'" said Madeline Potter, a loyal Shelton customer.

"You could get anything from a special type of fatback to special kinds of lychee nuts," said Potter, reminiscing about the store, which offered freshly backed bread and live lobsters, and delivered anywhere in the neighborhood for a $2.50 charge.

Shelton believed he prospered in the neighborhood -- composed of young, professional, white urban homesteaders and marginally less affluent old-time black residents -- because he offered items the chain stores did not stock.

Former customers told of Shelton's honesty and concern for his customers and employes, and of a personal touch they missed in the chain stores.Shelton's policies included hiring employes of both sexes and several races -- even some deaf students from Gallaudet College.

As a member of the board of Greater Southeast Community Hospital, Shelton started a campaign to donate medical equipment to needy hospitals in the southern U.S. and in the Caribbean. He was also active in donating his time and money to local youth causes.

"It certainly has left a void in the immediate neighborhood," said Ward 6 council member Nadine Winter, noting Shelton's reputation for the personal touch. "He was offering services over and above (that of the average grocer), like deliveries for senior citizens and other amenities."

At Shelton's suggestion, former customers and employes formed an ad hoc committee to operate the store at 500 12th St. SE as a co-op and preserve the spirit of a business that had become a Capitol Hill institution.

"The image was so good for small businessmen," Winter said, referring to the meteoric rise of the Shelton markets at a time when so many small, minority and neighborhood stores continue to fail.

Shelton said his problems started when he received financing from the now-defunct Bank of Columbia, which insisted he take a particular Rockville accountant on his management team.

"Everyone who was involved with him took a bloodbath, including me," Shelton said, describing the accountant as one who "knew nothing about supermarket business."

Shelton said that because of the confusion, he could never get a definite accounting of his receipts, even after he refinanced his loan. He compounded the problem by hiring a former employe of the Rockville accounting firm and failing to keep track of her accounting methods.

"The problems were multifaceted," Shelton said. "In my zeal to do a job, I didn't realize I was being [taken]."

Before the 1980 presidential election, Shelton's clienciele consisted of a number of Democratic members of Congress, staffers and appointees. He said the change in administration and the closing of the Washington Star, whose office was nearby, caused a number of residents who patronized his stores to relocate.

While this was going on, Shelton acquired a second property at 300 Eighth Street NE and began planning for a store in Anacostia.

Shelton said he ended up spending 60 to 80 percent of his time at the markets and about 20 percent on administration.

"Then we started having tremendous losses at the Eighth Street store," Shelton said, noting cash shortages and frequent holdups. "I had to come to the realization that I had to close it."

Shelton filed for bankruptcy on the Eighth Street store. Although the stores functioned as separate corporations, the 12th Street store bought stock goods for both stores.

Consequently, the majority of Shelton's suppliers refused to do business with him until the debts associated with the Eighth Street store were paid in full.

"I ended up having to pay bills from both stores from [income of the 12th Street store], creating a $3,000- to $4,000-a-week drain on the store," he said, noting that the 12th Street store could have made it without this extra expense.

"My feeling was that if it had to close down, I knew it was a good store and that the staff was a strong group of people who could make a co-op work," Shelton said. "In the present job market, I knew it would be better [for the employes] to keep the store open."

Shelton said he had offered to serve as an adviser to the co-op "because there are some things as employes they are going to have to go through in becoming owners."

Currently the 400-member co-op committee, composed of customers, churches, and former employes, is in the process of adopting articles of incorporation and filing for a $250,000 start-up loan with the National Consumer Co-op Bank, said the group's attorney, Gloria Coursar.

Although the store has been closed less than two weeks, many former Marketbasket customers, like attorney Lise Haupt, admit that they have been spoiled by Shelton's service.

Other committee members, like co-chair Madeline Potter, said she had been shopping in the 7-Eleven rather than going to a large chain store.

As for George Shelton:

"I did not fail because I wanted to fail," said Shelton, who sadly remembered how he felt when customers told him during the past few weeks that he was out of certain products.

"You begin a process of dying slowly inside..." Shelton said. "Here I was at one time with the fastest growing, best operated store in Washington, a credit to business development.... To fail and end up looking like a amateur.

"But I'm going to land on my feet. I don't know how, but I am."