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Michael Horwat leaned back in the driver’s seat of his silver Hyundai Santa Fe and stared across 8th Street SE at the door of his store, District Lock and Hardware. It was early morning, a Thursday in October. For two hours or so, Horwat sipped coffee and watched.
At around 11 a.m., locksmiths he had worked with for years appeared one by one from down the sidewalk and turned into the store. Horwat imagined what each man wanted to buy—the thousands of uncut keys, the boxes of high-security Multilock deadbolts packed in storage, the key machines, the grinding wheels.
He knew it would all soon be sold to the highest bidder.
In August, the city’s Office of Tax and Revenue had padlocked District Lock before Horwat had a chance to cart off the valuable stuff. By the District’s math, Horwat, 62, and his partner, Steve Harrell, 47, owed $975,000 in back taxes, an impossible sum, they figured, considering the paltry receipts of their failing hardware store.
Now the competition was inside District Lock, hoping to cast the winning bid on their tools, locks, and key blanks. But Horwat had one last shot—a tree trimmer named Chuck Dunn.
Inside the store, Dunn surveyed the merchandise, the right front pocket of his Levis bulging with $7,000 cash. Horwat and Harrell had scraped together $4,500, all the money they could gather. Dunn, a friend of Harrell’s, pitched in $2,500. His instructions were to buy as much of the lock shop as the money would cover. That way Horwat and Harrell could keep working. It was their only chance.
As Horwat watched the building, he noticed a familiar worker from the Office of Tax and Revenue standing by the door. He’d dealt with her before and hated her. She seemed to be watching him. Suddenly, from around the corner, a police officer on a Segway rolled up next to the woman.
She pointed at Horwat. The officer looked over. Horwat started the Hyundai, pulled away, and drove the streets of Capitol Hill before turning the Santa Fe toward his home in Annapolis. Horwat felt like he was being shooed away from his own place, while everything he had worked for was swept away. He would not even get a chance to witness it.
How did it come to this? If you ask Horwat and Harrell, District Lock suffered from an unlucky family illness paired with the rough new reality of running an old-time hardware store in a megastore world. But the fall, they believe, was a takedown job by the District government. “I feel like the Sopranos got me, OK?” Horwat says. “And there’s nothing I can do about it. I’ve been had by the mob.”
The conspiracy theory bit isn’t anything either man can prove. It revolves around the notion that the government favors certain businesses and uses strong-arm tactics to drive others under. The evidence is purely circumstantial. The facts point to another set of conclusions: Horwat is good with words. Harrell is magic with locks. But neither man is much for running a business.
The story of how the men became unlikely partners begins with a cheating wife. In 1987, Horwat got tired of her lies. He filed for divorce and found himself raising three sons alone in Prince George’s County. His service job at Xerox barely covered the bills. He needed money.
Horwat stumbled into a side job selling burglar alarms. It started out slow, an after-hours job run from his kitchen table. Then he met the owner of District Lock, a mom and pop in Capitol Hill. The owner let Horwat sell burglar alarms from the store and tipped him off to customers who had recently been burglarized. He took 25 percent of the profits. Both men made money.
In 1994, when Horwat retired from Xerox, the owner was ready to give up District Lock. Horwat used his pension as a down payment on 80 percent of the store. The owner kept the building and sold the remaining 20 percent of the business to Harrell, a locksmith at the store.
The new partners soon gave up on alarm systems to focus on hardware and locks.
Business, especially the lock business, was beginning to boom. During the next decade on Capitol Hill, rich people moved in, bought houses, and fixed up homes. The price of property rose. The neighborhood grew wealthy, but poverty and public housing were never far away.
It was the perfect place to sell locks. Even the rumor of crime in the neighborhood sent homeowners running to the store. Horwat says it was nothing for a suburban couple to move in and buy two $280 high-security Multilock deadbolts—one for the front door and one for the back—and a $500 set of installed window bars. Keys for the locks cost $15.
“It’s the mother lode,” Horwat says. “The gentrification of Capitol Hill in the District of Columbia is the mother lode for us.”
As the wealth spread out toward the Anacostia River, profits rose. Horwat remarried and bought a house in Annapolis. Harrell stayed in his rancher 35 miles away in Elkridge, Md. In time, Harrell upped his portion of the business to 45 percent.
A thin man with a bristle-brush mustache and screwdrivers poking from the back pocket of his Levis, Harrell was a natural partner for Horwat. He had made a living as a locksmith since the mid-’80s, after he wrecked his back humping cases of Miller and Canada Dry from a delivery truck. He still worked hard, taking days off only to sit camouflaged in a tree stand with his bow during deer season.
Horwat was sales. Harrell was sweat. Truth is, Horwat didn’t know much about locks. He could rap with customers about strengths and weaknesses, but pop the retaining clamp, dump the tiny pins and springs from the tumbler, and Horwat was lost.
Not so for Harrell, who could spring a lock with a candle, a blank key, and a tiny file. He ran service calls, cut keys, and installed the locks Horwat sold.
A good guy—that’s what Horwat thought about Harrell. Sometimes too good. On service calls, he tore locks apart and replaced $5 pieces instead of selling new locks customers probably thought they needed anyway. Harrell worked fast but was fastidious to a fault. A deadbolt that fit damn near perfectly got pulled out and reinstalled. It drove Horwat crazy.
Take the steel-and-plexiglass security storm doors sold at District Lock and Hardware. Harrell would spend hours installing the doors, making sure the seal fit right. “There is hardly a doorway in the District that is square,” Horwat says. “Sometimes they are the shape of trapezoids. It was almost like he was trying to put a square peg in a round hole. And he wouldn’t quit until he did it.”
Not a bottom-line man. Harrell knows it. “I love this job because I’m helping people,” he says. “When I drove the beer truck, I didn’t feel good about what I was doing.”
The mother lode carried the store for years, but gentrification ultimately turned on them. The new-look D.C. of loft condos and 300-series BMWs began appealing to the big chains. Horwat and Harrell didn’t care too much about H&M, but Home Depot was another matter. The hardware megastore opened in Brentwood in 2002.
Comparison shopping was a scary prospect for District Lock, an Ace hardware store with a contract to buy stock from the Ace distributor. At Home Depot, tools often sold for less than Horwat’s wholesale cost. He passed the cost on to customers. “The only people who bought at my store were people without transportation—locals,” Horwat says. “No one in their right mind would buy something at my store.”
Horwat did what he could to keep prices low, including scrounging the Home Depot in Oxon Hill, Md., for hammers and screwdrivers, blister packs of screws, bolts, and picture hangers—anything that was cheap.
It didn’t take long for Horwat’s Ace distributor to wonder why the store wasn’t buying as much as it used to. Horwat didn’t think filling his shelves on the cheap was a problem, just smart business. He told the Ace distributor the truth.
Ace, of course, disagreed. The distributor’s call wasn’t really a threat, Horwat recalls, just a reminder of his contract. In 2000, he stopped buying from Home Depot. Costs rose. Profits fell. “I thought it was a good idea what I was doing,” he says. “And in a sense it was. But they were right, too.”
To mention that Horwat and Harrell are bad businessmen is to undersell the calamity of the next several years. As profits fell, there were no layoffs, no fresh looks at their market strategies. Instead of dropping hardware, the partners dug in.
The average customers might buy only $1.50 in bolts, nuts, and washers, but Horwat and Harrell figured hardware brought in traffic for the key and lock business, which continued to make money. The partners didn’t factor in the cost of paying a sales staff and the $5,700 rent on the cavernous store with the tiny lock shop in back. The store was what it was. They couldn’t picture it any other way.
To prosper, a store owner needs three things, according to Horwat: a good bank, a good lawyer, and a good accountant. Add to that a good business manager.
At District Lock, the business manager job went to family. Horwat’s sister kept the books until 1999, when they ran into trouble with the Internal Revenue Service and the District. Back then, the store wasn’t charging tax on service calls. Horwat didn’t know he was supposed to. He says he handed $210,000 to the District over several years to pay off that debt.
After the tax problem, Harrell’s wife became business manager. Kathy Harrell worked part-time, often from home, while taking care of two teenage daughters. In 2002, soon after she gave birth to a son, she was diagnosed with postpartum depression and began spending less and less time at the shop.
Hardware continued to dive. Every month, the store paid a $300 late fee on rent. They never got two months behind, but they were always late.
Twice a month, on Friday mornings, a courier company dropped off payroll checks at the store. Employees ran out at lunch to cash them at the National Capital Bank. One Friday afternoon in January 2007, Horwat beat them to the bank. He was headed to Virginia Beach for the weekend with his wife. He needed his $1,500.
Cash in hand, he was pulling away from the bank when he heard someone yelling his name. His cashier and administrative assistant walked up to his window. The bank had refused to give them money. The teller had told them the bank no longer accepted checks from District Lock.
Horwat was stunned. When money was tight, he and Harrell held their checks, but they had never botched employee payroll. Kathy hadn’t said anything about being low on cash. He guessed it was a glitch at the bank. He paid off his employees with his money, left the bank, and called Kathy.
It was no glitch. The IRS had seized the store’s account. Once again, the store was behind on taxes.
On Monday, Horwat hustled to the IRS building and met with an officer, who told him the office had been in contact with Kathy for months. They owed $48,000. Within two weeks, Horwat had set up a payment plan.
He was angry at Kathy, but Horwat had been through the IRS drama before. He knew what to expect. It was something that happens, a price of doing business. Sometimes accounting gets screwed up. You fix it, make a payout, and move on.
The financial pothole was deeper than he imagined. When the partners confronted Harrell’s wife, she told them they were also in trouble with the District. For months, she had put off tax payments to keep the company running.
“Every month I kept thinking, We can do this. We can get out of this,” Kathy Harrell says, recalling the trouble. “But as each month went by, things got slower and slower in sales. I don’t know. I don’t know. With my depression, I think I just let it go.”
The partners were stunned. “It was like someone telling you you have cancer or something,” Horwat says.
The District proved a tougher problem than the IRS. When Horwat met with a woman at collections, she would not negotiate. “She told me if I didn’t have $50,000 to put on the table, I could leave,” he recalls. He didn’t have the money. “They might as well have asked for $500,000.”
At home, life deteriorated for Horwat. His wife was furious, asking questions about the store that he couldn’t answer. How did it happen? Why didn’t he know? “I think she thought I screwed up,” he says.
Horwat’s personal account was overdrawn. Debt was rising, every day a new surprise. “Within a few days, I had a mental and physical breakdown,” he says. “I was uncontrollably crying.”
He went to stay at his son’s house in Clinton, Md., borrowed $1,200 from his nephew, and visited a psychiatrist who prescribed Lexapro and Xanax. He mixed Ambien and Chianti before bed.
In the mornings, he drove to work early but often didn’t go inside. He sat in his truck in the street, laid his head back and watched the store, remembering how everything good went to hell. A kind of therapy, he says.
For Harrell the breakdown was something else all together, a lack of communication at work, collapse at home, failure all around. He didn’t blame his wife. He blamed her depression and himself. “I should have known,” he says. “I have never felt so bad about myself in all my life.”
Harrell didn’t have much time to think about it. Soon after the tax problem surfaced, he blew a hole in his large intestine, sending him to the emergency room. Doctors wanted to cut out a piece of intestine and give him a colostomy bag while it healed. Harrell declined. Instead, he’s eating a lot of yogurt. “Eats the bad stuff,” he says about the bacteria.
The collapse did not split Harrell and Horwat, though Horwat still avoids Harrell’s wife. In time, the two regrouped and gathered advice from lawyer friends. They told collections about Kathy Harrell, about her depression and how they never knew about the tax problem. They signed on with a tax resolution contractor. They continued working, hoping to stay in business.
The talk, the work, and the money spent on the contractor got them nowhere.
On a Thursday in late August, Horwat was vacationing at a friend’s bayside townhouse in Ocean City. Harrell arrived at the store at around 6:30 a.m. to plan the day’s work. At around 9 a.m. the store phone rang. Harrell answered. A woman on the line said she was from the District government. It was a “heads-up call” that the Office of Tax and Revenue would arrive at around 10:30 a.m. to padlock the door. She hung up.
Harrell thought it was a prank call. As far as he knew, they were still in negotiations with the District, far from the endgame. He went on the road to install locks. The phone call in the back of his mind, he phoned the store regularly to check in; 10:30 a.m. passed. Everything seemed fine.
At around 11:30, Horwat’s cell phone rang. It was his wife. The store employees were standing outside. The store had been seized. Harrell didn’t call Horwat. He didn’t want to ruin his trip.
Beddell Terry, chief of the Office of Tax and Revenue Collection Division, says what happened to District Lock and Hardware was unusual but that the office followed the rules, which allow wide autonomy in dealing with tax scofflaws. The agency is less willing to negotiate with businesses that owe sales taxes, he says, because unlike income tax, the money never belonged to them.
In most cases, Terry says, owners borrow to pay their tax debts, liquidate their assets, or declare bankruptcy. The office isn’t out to shut businesses down, he says. Since Terry arrived at the job three years earlier, the office has never auctioned a business. “That is the final piece of enforcement,” he says. “And we do not take it lightly, at all. That is not what we are here for. Well, it is, but it’s not.”
With the store shut, Harrell and Horwat hired an attorney, Jim O’Dea. The men figured District Lock could pay $5,000 a month on the bill. O’Dea, who after looking at the books believed the two men actually owed around $100,000, went in to negotiate. He had no more luck than Horwat.
“They wanted $50,000 immediately or they would not resolve it,” O’Dea says. “They wouldn’t lift. We couldn’t come up with the money because the store was locked up.”
Soon after Horwat drove away on the morning of the store sale, the auction was ready to begin. Prospective bidders had an hour to inspect the store. In the front section, paint, tubes of caulk, and plumbing supplies covered the shelves. The real money was in the lock room at the back and the storage area above the store where they kept inventory. One locksmith who was at the auction guesses there was $30,000 worth of locks alone in the store.
The men formed a circle at the front of the store. Dunn, his pocket filled with Harrell and Horwat’s cash, leaned against a soda machine while a man from the auction company explained the rules. The auction would be held in two parts: first the hardware, then the lock shop. By 3 p.m. the next day, winners had to remove everything or pay a $600 daily fine.
Many of the locksmiths gave up right there. The store might go cheap, they figured, but there was too much stuff to haul away in such a short time. Most didn’t have storage space. They had planned to come away with a few items, not half the store.
Hardware went first, together with a worn-out Ford pickup. Few seemed interested. As the numbers rose, a couple of men tossed up their hands to bid. The auctioneer stopped at $2,000.
Next was the lock department. Dunn and another man seemed most likely to win, bidding in increments of $1,000, one after another. The dollars increased fast. As the price approached $4,000, Dunn got ready to use his own cash.
When the other guy bid $5,000, Dunn countered with $6,000. The other guy bid $7,000. Dunn hesitated. The bulge in his pocket couldn’t cover the price. The lock shop was gone. The winning bids for the hardware and the lock shop equaled $9,000. District officials and the auctioneer went in the back to talk.
They walked out and told the men they were starting the auction over. The winning bids were canceled. This time, they would auction the entire store at once.
The crowd was silent as two or three men bid on the store. Dunn stuck around to watch, though his $7,000 had no chance. He did not know the short man in glasses who bid last.
“Would you believe they got $10,000 for the whole kettle?” says Harry Goldberg, the lawyer for the property owner, who witnessed the auction. “It was really a shame.”
It didn’t take long for Horwat and Harrell to figure out that things were set to get even worse.
“There has not been one thing that has been going in our favor,” says Harrell. “It has all gone to the bad.”
The day after the auction, Horwat drove by the store. Nothing had changed—hardware hung on the walls; the lock shop sat intact at the back. Inside, men were working. It looked like they were doing inventory, getting ready to move the stock out. A lot of work ahead of them, Horwat figured.
He walked inside and asked for the owner. A man Horwat had never met gave him a business card. The man was Whit Conway, the owner of Central Safe and Locksmith Co.
Conway runs one of the largest locksmith operations in town, with a store in Adams Morgan and one near the Walter E. Washington Convention Center. Horwat wasn’t surprised to see that a locksmith had bought up his stock.
Horwat introduced himself and asked Conway if he would sell a set of window bars in the back room that were on order for a customer. Conway said he would think about it.
The next Monday, Horwat drove back to the store, “just like you would to a gravestone, you know?”
By then, he had learned more about Conway, about how a developer wanted to build a hotel where his store sits across from the convention center, about how it looked like the District government would take the building Conway leased through eminent domain laws, about how he needed a new store.
This time, Horwat expected the store to be empty, ready for a clothing store, a coffee shop, or some other upscale business to move in. But when he looked inside, Horwat saw the truth. Nothing had been moved. The hardware was still inside. Something was going on.
Horwat drove to Conway’s store near the convention center to confront him. The locksmith said he was negotiating with the landlord to open Central Safe on the property.
That’s when Horwat and Harrell’s conspiracy theory took root. Not only had they lost their business; they believe the District turned their store over to a competitor, a man it wanted out of a prime location so a developer could build a hotel. It seemed like a deal.
Nothing a person could prove, but Horwat and Harrell believed it. Then they learned the Office of Tax and Revenue had given Conway a walk-through while the store was closed.
“I feel like a fool. The government played me. Everybody played me,” Horwat says.
Terry, from the Office of Tax and Revenue, says the walk-through wasn’t against the rules. Anyone interested in bidding on the merchandise could have called the office and gotten a tour, he says.
“If you are looking for a news story there, you can do that,” Terry says. “But our response is, ‘So what?’ To be real honest with you, that is a normal course of business.”
Conway says he toured the building not to check out the stock before the sale but to inspect the store for leaks. He was thinking about moving in. Still, he says, there was no trade engineered by the District. Even if the government proposed it, which Conway says it didn’t, why would he accept? The Capitol Hill space has no parking, it’s small, and it’s expensive, he says.
After the auction, Conway paid a month’s rent to Horwat’s former landlord and thought about extending. By the middle of November, he was still peddling hardware from the auction at a 20 percent discount and negotiating with the landlord about rent. Out front, a Central Safe sandwich board sat on the sidewalk.
“I’m kind of waiting to see if I get a long-term lease,” Conway says. “I want to be in the neighborhood.”
Horwat and Harrell say they will be in the neighborhood, freelancing lock work out of their trucks, tying to work themselves out of debt. The store phone still rings to Harrell’s house. Kathy Harrell jots down jobs and relays them to her husband’s cell phone. They are planning to run a “formerly District Lock” advertisement. Harrell is looking for a panel van.
Many of their old customers who call for service don’t know the store is closed, but business has dropped. They used to get 30 to 40 calls a day. Now they get 10 to 15.
Horwat’s sales career is over for now. Most days, he follows Harrell from job to job, learning how to be a locksmith. Harrell is doing his best to teach him, starting at the beginning—Locksmith 101, keys, springs, tumblers, and pins.
For Harrell, it’s still $5 parts, everything perfect.
On a recent morning, Harrell climbs the steps to a row house in Capitol Hill. A woman opens the door with a pair of pliers. Her door knob had stripped off in her hand. A complete lock assembly, including a new knob, would cost her $200 installed.
Instead Harrell walks to his truck, climbs over the tailgate, and digs through locks, tools and parts packed in the back. He surfaces holding a matching gold-colored replacement knob.
Back at the house, he tightens the knob and has the woman try the door.
“How long has it been on there?” Harrell asks.
“Probably came with the house or at least since the renovation in the 1960s,” she says, pulling out a checkbook.
Harrell charges her $100.
“I’m going to have you make that out to Steve Harrell,” he says.
“H-A-R-R-E-L-L?” she asks.