A story yesterday incorrectly stated the amount of a loan that Clarence Oliver Jr. obtained from Save-More Inc. The actual amount of the loan was not a part of the court records. A $100,000 loan from the corporation was obtained by Roy Littlejohn, the company's owner. (Published 10/22/87)

A company owned by D.C. contractor Roy Littlejohn, who has been identified as a subject of a federal probe of alleged D.C. government corruption, has filed for protection against its creditors under federal bankruptcy law, claiming that it cannot pay the more than $3.7 million it owes 167 creditors.

In a petition filed Thursday, the company, Save-More Foods, listed $2.1 million in assets and said that "there is a reasonable possibility of rehabilitation of the business" if it is given time to prepare a reorganization plan. During the past year, the company has received almost $5 million in city contracts, while all companies controlled by Littlejohn have received city contracts worth $14 million.

The company is defending a civil claim in federal court by Preferred Meal Systems, an Illinois supplier that alleges that Save-More failed to pay almost $878,000 it owed for food used in its contract to provide school lunches in D.C. schools.

In that suit, an attorney for Littlejohn, Eugene Propper, has argued that Littlejohn should not be forced to testify because he is a "target" or a "subject" of a federal grand jury investigation of the D.C. government. Any testimony Littlejohn might give, Propper stated in court papers, could be used against him by a federal prosecutor.

Propper declined to comment about the case yesterday. Littlejohn could not be reached for comment.

U.S. District Judge Charles R. Richey has rejected Propper's bid to seal portions of the case and has appeared unsympathetic to the firm's claims that it was unable to pay the food supplier because the city was slow in its contract payments and because the money was used to expand the business.

In a hearing two weeks before the company filed for bankruptcy, Richey told Propper that it was clear that it owed the debt, and he said the company should pay the $878,000 "right now."

"It seems to me that somebody who gets goods as well as services and is paid for them and then doesn't give it to the party that provides them cannot just get by by saying, 'We didn't pay them because we needed that money to engage in other business activities,' " Richey said at the hearing. "Robbing Peter to pay Paul is what it boils down to."

The suit is on hold in Richey's court while he decides if it can go forward against Littlejohn, who has not filed an individual bankruptcy petition, and Save-More manager Clarence Oliver Jr. The two men are also defendants in the action.

Records in the case indicate that Littlejohn and his wife received $100,000 a year in salaries from the company at the same time the company was failing to pay Preferred Meal Systems. In addition, court records show that Oliver received a $100,000 loan from Save-More and made a $15,000 payment on the loan directly to Littlejohn.

Littlejohn emerged in May as a subject of the federal investigation of the D.C. government when prosecutors mentioned his name in search warrants. Sources close to the investigation have said prosecutors are attempting to determine whether he participated in paying hush money to Karen K. Johnson in return for her silence about alleged drug use by Mayor Marion Barry.

Companies controlled by Littlejohn obtained more in District contracts last year than any other firm participating in the city's minority contracting program.

Contract records show that Save-More has received at least $4,933,368 in food contracts from the District government in the past 12 months. Save-More is part of a joint venture that holds a $771,503 contract to provide food services to the city's alcohol and drug treatment centers.

A U.S. grand jury has subpoenaed all records of city contracts with Urban Shelters, Save-More, Littlejohn personally and his consulting firm, Roy Littlejohn & Associates. Staff writer Sharon LaFraniere contributed to this report.