City Paper is not for tourists
The way Fred Cherney tells it, there was really no reason to suspect anything. After all, he’d done business with Jerry Kapiloff years earlier, when Kapiloff was running his own cosmetics and chemicals company. Kapiloff was such a good client that Cherney’s small Friendship Heights-area printing firm, Duplicate Impressions, could have used more clients like him. “Everything was cool,” says Cherney. “He’d come in, place orders, pay up—all very friendly and pleasant.”
Their dealings were so pleasant, in fact, that in April 1992, Cherney struck a deal with Kapiloff that he hoped would help him revitalize his anemic business. The recession had been particularly unkind to Duplicate Impressions, and when Cherney advertised for a commissioned salesman to bring in business, the ever-charming Kapiloff showed up at the Wisconsin Avenue firm.
“He called himself a printing broker now and said he had lots of clients,” says Cherney. “I thought to myself, “Well, this could be a real shot in the arm.’ ”
The deal was attractive to both men: According to Cherney, Kapiloff would line up business at any price he could get, no matter how inflated; then, within 30 days of the orders being filled, Kapiloff would pay Duplicate Impressions its standard rate. The arrangement could mean more business for Cherney and potentially hefty commissions for Kapiloff, whose taste for fine clothes, fancy cars, and posh addresses was, as always, very much in evidence.
The agreement was verbal—standard operating procedure for the 45-year-old Cherney, whose sneakers, jeans, and untucked polo shirts are a perfect complement to the faded wood-and-linoleum decor of his modest, cluttered shop. Call it an informality bred from doing business by handshake for 13 years.
And suddenly, with Kapiloff on the job, he was doing a lot of business. “The work was rapid-fire,” Cherney says.
Just as quickly, however, the orders mysteriously stopped. To complicate matters, the due dates on bills for the first round of jobs came and went with no payment from Kapiloff. But not to worry. “He told me he was still waiting to be paid by the clients,” says Cherney. “He said as soon as he got the money, he’d pay me.”
Weeks later, with the outstanding bills totaling some $7,500, Cherney agreed to deliver one of Kapiloff’s final printing jobs to Kapiloff’s office at Georgetown’s Washington Harbour.
“He promised he’d have the check then,” Cherney says. “He didn’t. He was driving a brand new Jag, but he didn’t have my check. He said he was going to be getting paid soon, and then he’d pay me.”
Cherney suspected that something was rotten, so he called one of those supposedly delinquent clients. The affable Cherney still can’t control his anger when he recounts the conversation: “They told me they’d paid him c.o.d. at his insistence when he brought the work in!”
Cherney left phone messages for Kapiloff. No response. He faxed him the invoices. No reply. Finally, with no way to swallow the loss of a month’s rent, he turned the matter over to a collection agency. The result: “They told me that every time they sent their investigators over, Kapiloff would throw them out.”
Cherney hired a second agency, but its personnel had no luck even catching up with Kapiloff—and they apparently weren’t alone. Last December, the collection agency wrote Cherney to report that a swarm of private eyes and corporate representatives eager for an audience with Kapiloff regularly descended on the Washington Harbour office—always to no avail. And in one of the great understatements of recent times, the letter from Cherney’s collection agency also revealed that the courts had handed down “several civil judgments” demanding that Kapiloff pay his debts.
At last count, District and Montgomery County courts had issued roughly two dozen such legal judgments. This, it turns out, is the same Jerry Kapiloff who has been sued upward of 40 times in local courts for allegedly failing to pay everything from attorney fees and hotel charges to bills from florists and furriers. The same Jerry Kapiloff whose name turns up another 10 times in landlord-tenant court records over unpaid rent for residences or office space, often in neighborhoods like Georgetown and Chevy Chase. The same Jerry Kapiloff who has been reported to governmental authorities for his uncanny ability to be accused of not paying his bills.
Suddenly, it occurred to Fred Cherney that the image of high-rolling, high-rent Jerry seemed to be just that—an image.
But that, of course, only raised the questions scores of people have been asking about Gerald Samuel Kapiloff Jr. for a very long time: How does he manage to maintain that image with all those judgments against him? How does he stay in business with a credit record that looks like a blotter for red ink? Can’t anyone do something about this guy?
In Washington’s world of bad debts, where laws protecting debtors are especially generous, trying to collect money owed is often more frustrating and expensive than simply writing off the obligation. Getting a legal judgment from the courts helps, but it hardly guarantees payment.
“Once you get a judgment, all you’ve done is memorialize the fact that money is owed,” says Washington attorney Christopher Kliefoth. “You still have to collect, and collecting always ends up a circus.”
Particularly if the person you’re trying to collect from is a high-wire artist like Jerry Kapiloff.
Kapiloff is by no means the only local businessman whose professional biography is being written serially in court records, but his story is uniquely instructive of how there is not only life after judgment, but a very good life indeed. In addition to the residences for which he has been accused of not paying rent, there are allegations of unpaid charges for office services, hotel rooms, and airline tickets, among other things. A number of businesses that Kapiloff has been involved with have collapsed. And how he manages to continue this is, like the man himself, anything but simple.
The 40-year-old, self-styled entrepreneur seems a magnet for financial calamity, although his appearance and demeanor belie any such difficulties. Always well-dressed and fairly well-spoken, Kapiloff has a way of “sweeping into a room” and dominating it “like Svengali,” says one who knows him. Chalk Kapiloff’s dominance up to sheer size—Cherney puts him at close to 6 feet, and these days perhaps 230 to 250 pounds. While possessing a certain imposing stature, Kapiloff nonetheless can be “very charming, accommodating, and nice when he wants,” Cherney adds.
But Kapiloff doesn’t always want to be nice. People he’s done business with say he’s the classic bully: He has been known to contract for services, then either ignore the bills or not-so-subtly imply legal action against those with the temerity to demand payment. If a landlord wants back rent, for example, Kapiloff has on occasion protested that the amenities did not match those described in the lease, and that he’s prepared to resolve the matter in court. Those who stand up to him often receive satisfaction, but usually after a long and painful process; those who don’t are usually left either totally frustrated or cowering in his wake. Some nervously refuse to discuss their ill-fated business dealings with Kapiloff, even after receiving assurances that they won’t be identified in any way. Others wearily refer to themselves as members of the “VOK Club”: Victims of Kapiloff.
Kapiloff turns up in D.C. court records as early as 1979, when Automater Packaging Systems Inc., Merrill Lynch, and Woodmont Carpet each sued him separately. Only one suit—by Washington Hilton Joint Venture—was filed against him during the ensuing two years, but his court profile rose considerably in ’82, the year his fledgling public relations firm was hired to promote a charity ball for Ronald McDonald House.
Kapiloff had won the contract based on a letter of recommendation he purportedly received from Big Brothers of Washington, a charity for which he had organized a fund-raising event six months earlier. But a Washington Post story about the Ronald McDonald event said that Kapiloff’s work for Big Brothers had produced no net revenues and led to “a messy aftermath of unpaid bills, a lawsuit, and an FBI investigation.” There is no evidence that the alleged investigation led to any legal proceedings against Kapiloff. (Big Brothers told the Post that when Kapiloff staged their fund-raiser, he gave away more of the $250 tickets than he sold.)
But the Post also reported that Big Brothers had no recollection of ever writing Kapiloff a recommendation. And given the stack of unpaid bills he left behind, Big Brothers were not inclined to heap much praise on him: $4,000 was owed to singer Bobby Short, whom Kapiloff had brought in for the event; $13,000 was due Braun’s Caterers; and Angelo Bonita Custom Florist was still waiting for payment of several thousand dollars, a tab that included Valentine’s Day bouquets Kapiloff ordered for four very special someones and his mother—his favorite valentine, according to the enclosed card. The president of Big Brothers, Lee Satterfield, was so overwhelmed by the debacle that acquaintances said he considered mortgaging his home to cover the bills Kapiloff had run up.
When Big Brothers officials tried to reach the PR impresario, they found that his phone numbers had been changed. His office, they later learned, was nothing but a secretarial service on I Street NW. But if Big Brothers wanted a word with Kapiloff, he had no reason to talk to them: True to form, he had collected his $2,000 fee before Big Brothers could find out that the revenue would not cover the costs.
As anyone involved in debt actions can attest, there’s a 60-day period in which to serve a summons after the complaint has been filed in D.C. civil court, 10 days in small claims. Even if someone has admitted to the world that he owes you the money, you can’t prosecute if you can’t stick him with a summons in the allotted time.
Most summonses are delivered by the professionals of the process-serving trade.
“I can’t tell you how many times I walked in somewhere asking to see Mr. So-and-So, the secretary walks to his office, I hear them whispering, and she comes back and says he’s not in,” says “Maverick,” an employee at Capitol Process Service who prefers to remain anonymous. “I’ve had to climb trees to get to people [before time expired]. I’ve had to climb through broken windows.”
S. Bruce Pascal used to own and operate his own process-serving business, and Kapiloff’s was among the handful of names that he says appeared regularly on subpoenas.
“I never served him myself,” Pascal recalls. “But I’ll never forget my employees always coming back saying they’d been to his house, and every time a different beautiful young woman in skimpy clothes would answer the door and say, “He’s not home.’ ”
This time around, Pascal’s hounds would be held at bay: Big Brothers didn’t sue Kapiloff, but there were still opportunities aplenty to serve some paper. Those who sued Kapiloff that same year, 1982, included Tricentennial Energy Corp., Ambassador Travel, Dandesign Inc., and Passport Leisure of Georgetown Travel.
Over the next four years, about a dozen lawsuits were filed against Kapiloff in the District alone, including a 1985 action by Atlas Employment Agency. Atlas had placed an employee with one of Kapiloff’s businesses at the time, and when Kapiloff failed to pay the agreed fee, the agency filed suit. Then the seemingly impossible happened.
Eugene Ebert, the attorney representing Atlas, not only won the judgment but was able to find and attach the appropriate bank account for the full amount owed his client. This was something of a feat in the Washington area, where assets are easily moved among the three jurisdictions of Virginia, Maryland, and the District. A judgment is only enforceable in the jurisdiction in which it is obtained, unless it is subsequently registered in another jurisdiction—where the defendant has suddenly decided he’d like to bank.
But Ebert was uniquely motivated: “I probably would’ve given up,” he says, “if the head of the employment firm hadn’t been my wife.” After securing the judgment, he adds, “suddenly I was getting calls from a lot of other creditors who were looking for [Kapiloff].” Not surprisingly, a number of them had won judgments but, despite their efforts, had been unable to collect.
Local attorney Richard Deering was determined not to become one of those holders of worthless paper.
Deering became familiar with the Kapiloff style in 1986, when Kapiloff gained controlling interest in a downtown exercise studio called Diana’s. Diana Hart, the only other stockholder after Kapiloff bought in, sued her new partner not long after he took charge. In her suit, she alleged his “gross mismanagement” of the company, his having received money belonging to the business without accounting for its receipt or disposition, his breach of promise on her income and employment status, and his failure to repay a $40,000 loan she made to him. (Call it coincidence, but a suit filed four years later by Kapiloff’s girlfriend at the time, his business partner on a different venture, would read almost like a photocopy of the Hart suit.) Deering represented Kapiloff in both proceedings.
Hart declined to talk about the affair, but her attorney, Ed Kimmel, discusses the Kapiloff financial record candidly.
“I had never seen anything of this magnitude before,” says Kimmel, who has specialized in bankruptcy work for 11 years. “The number of [previous] companies that he had left behind with a lot of litigation was impressive. And many of those companies didn’t just go down, they went down with massive cleaning up. There were a lot of people unhappy with him.”
Kimmel says that Hart dropped her suit when the former partners who had sold their stock to Kapiloff offered to buy out her shares. “They insisted on [her ending the suit],” Kimmel says. “They wanted to buy peace.” They also wanted her gone as a condition for their returning to the business. She accepted their offer, and they joined forces with Kapiloff to try to save the exercise studio. But the company ended up in bankruptcy a short while later, putting 35 people out of jobs.
When all the grunting and groaning was over, Deering presented Kapiloff his bill. When payment wasn’t forthcoming, Deering not only sued his former client but petitioned the court to freeze Kapiloff’s assets pending the outcome of the case. Why? Among the accusations Deering filed in D.C. court papers was that Kapiloff was removing property and assets from the District in hopes of defeating demands against his company, GSK Inc., and delaying or defrauding its creditors.
Furthermore, according to Deering’s court filing, GSK was nothing more than “a sham corporation behind which Gerald S. Kapiloff masks his business operations and assets.”
The court apparently agreed, because Deering won a prejudgment attachment on Kapiloff’s bank account. At that point, Kapiloff readily agreed to work out a repayment schedule, which he eventually fulfilled to the penny.
About the same time Kapiloff was embroiled with the Diana’s disaster, furrier Rosendorf-Evans added to the entrepreneur’s troubles by securing a $3,369.01 judgment against him for the unpaid balance on a “natural ranch mink coat.” Worldwide Travel got a similar judgment for $6,000. Palace Florists later brought two suits against Kapiloff, but dropped both for unspecified reasons. At least four other suits against him were also dropped, one apparently because the summons could not be served in time. And at least two of Kapiloff’s other attorneys have sued him for not paying their fees. Despite judgments in each of their cases, however, court files show no indication of either lawyer having collected any money. One attorney was unable to collect, and the other declined to comment.
As for Deering, he’s had an unpleasant sense of déjà vu. A complaint filed recently in Montgomery County asserts that Kapiloff still owes $9,300 for legal representation in both an eviction proceeding and a civil suit accusing him of defaulting on a loan. Once more, Deering is seeking a prejudgment attachment because, as he writes in his complaint, “Gerald S. Kapiloff has repeated[ly] moved his residence as well as his bank accounts and other personal property with the intent to hinder, delay, and defraud his creditors.” According to court records, the case is still pending.
Jerry Kapiloff grew up in litigious circumstances. His mother, the former Anita Albert, filed for divorce from his father, Gerald Kapiloff Sr., on Dec. 1, 1954. In her suit, Anita claimed she was the victim of cruelty, that her husband of two-plus years abused and beat her and then finally threw her out of their house. She attempted to rescue her clothing and her 17-month-old son later, but failed when Gerald Sr. shoved her out into the rain and locked the door behind her. With no money or belongings, she moved in with friends at their Woodley Park efficiency.
Anita was 28 at the time. She had moved to Washington in the summer of 1951, arriving here from Florida with her mother and her son from a failed first marriage, 6-year-old Bruce. Anita met Gerald Kapiloff the following February, and on Aug. 11, 1952, the two were married in Ontario, Canada.
Gerald was 19 years Anita’s senior. His first marriage had ended in divorce a decade earlier, and since then he had established himself as a successful entrepreneur. He owned a Berwyn, Md., company that manufactured paint remover and furniture polish. He founded a small office-supply company, Potomac Products, on two adjacent parcels he owned on 19th Street NW, just below M Street. He was president of Senate Realty, which held the title to the family residence on Massachusetts Avenue NW, just east of Sheridan Circle. He owned a 38-foot cabin cruiser that had cost him about $75,000. When Gerald Jr. was born, the Kapiloffs had a live-in maid.
But there was trouble in paradise. A fire that injured three passengers on Kapiloff’s boat resulted in court awards totaling $11,000. Senate Realty was sued for the recovery of more than $4,000 in overcharges. The Berwyn chemical firm was slapped with a pile of judgments, and it was shut down. Then there were the personal problems.
Anita insisted that Gerald not only abused her but refused to let Bruce live with them. On the November night that Gerald allegedly threw Anita out of their home, she claimed that he wrongly accused her of having a venereal disease. In a deposition taken a month later, she testified that he grabbed Gerald Jr. from her and said: “Bootsie, don’t touch your mother. She’s contaminated.”
Gerald Sr. maintained that he never assaulted Anita; in fact, he asserted that she was the attacker, once even flinging a heavy ashtray at him. He alleged that she was an unfit mother, that she sometimes left Gerald Jr. for days without disclosing her whereabouts, and that she refused to accompany father and son on a New Jersey beach vacation to celebrate Junior’s first birthday. Gerald further claimed that Anita had drastically inflated his net worth, which she told the court was about $200,000, and that she had injured his credit by incurring large debts and negotiating bank loans without his knowledge. He was even stuck paying for her premarital obligations, he complained, including a fur stole that she had purchased on the installment plan.
Both Kapiloffs wanted custody of their son, but Anita eventually won out. The following March, the U.S. District Court ordered that Anita would be awarded temporary custody of Gerald Jr. and that she was further entitled to $295 per month in alimony and child support. The payments would begin on March 15, the court decreed.
Three days past the deadline, Anita had received neither a check nor Bootsie. A month later, when money and son were still missing, the court ordered that Gerald be held in contempt and that the U.S. Marshal take him into custody. But there was a problem: Daddy had recently sold his boat, taken new mortgages on his properties, and fled to Mexico with Gerald Jr. and the loot.
He returned voluntarily in July, and the battle was immediately rejoined. Gerald sought to have the alimony payments reduced; Anita petitioned the court to have them increased. She said she had large medical bills; he said the extra money she sought was fuel for her extravagant spending habits, and by way of example, he pointed to another fur coat she had bought during his four-month flight. She admitted buying the $600 mink but said she soon returned it.
On and on it went until the following June, when the unexpected happened: The Kapiloffs reconciled their differences and resumed living together. In October 1956, Anita’s attorney informed the judge of the happy developments and filed a motion to dismiss the divorce proceedings. The tug of war over Gerald Jr. had ended, and the 3-year-old was again part of a happy household. The case was closed.
All that remained was to pay attorney Allan Kamerow his $1,500 fee for representing Anita. But the Kapiloffs had other ideas. The following winter, they went to court and charged, among other things, that Kamerow’s services were intended to prolong litigation and were contrary to the code of legal ethics. As a result, they wanted the court to set aside Kamerow’s fees; for good measure, they wanted all the money returned that was already paid to him.
On Oct. 1, 1957, after months of legal wrangling, the judge denied the Kapiloffs’ request and ordered them to pay the balance due Anita’s attorney. And they complied—nine years and 10 months later.
By the late ’80s, Anita and Jerry Kapiloff Jr. had launched their next venture, Heritage Press. The exact nature of the business is somewhat confusing, particularly if you rely on D&J Associates/More Than Travel vs. Gerald and Anita Kapiloff for the inside story.
According to documents filed in Montgomery County court, Kapiloff approached More Than Travel travel agency in late 1990 on behalf of the Heritage Press, for which he claimed he was a vice president. Kapiloff asked More Than Travel to bill Heritage for travel services rather than require payment in advance. More Than Travel agreed—a decision that ultimately left its enraged owners sprinting for the courthouse.
The court documents state that Kapiloff spoke with More Than Travel representatives about making arrangements for a Caribbean business/entertainment trip for himself and certain Heritage clients and their guests. Kapiloff asked More Than Travel to book the flights, but said he would personally reserve villa accommodations through Anka, which he described as a company owned by oil businessmen that rented its resort properties to selected clientele.
There was one hitch, however. According to the complaint filed by attorney David Bralove, Kapiloff told More Than Travel that he wanted the charges for both the airfare and the villa rentals consolidated on one bill. To accomplish this, Bralove says, Kapiloff persuaded More Than Travel to write checks payable to Anka to cover the cost of the villa rentals. Kapiloff told the travel agency he would then forward these checks to Anka to pay for Heritage’s accommodations. Naturally, More Than Travel expected to be reimbursed by Heritage for paying these charges; in addition, the travel agency would be compensated for going along with Kapiloff’s plan by tacking on to Heritage’s bill a 10 percent commission.
For example, supporting documents filed with the complaint show that on Dec. 27, 1990, More Than Travel wrote a $2,765 check to Anka to cover the cost of Heritage’s villa rentals; two days later, the travel agency wrote Anka a check for $2,875 to cover additional rentals for Kapiloff and his guests. When More Than Travel sent Heritage a bill the following month, it listed the $2,765 and $2,875 charges and added on commissions of $276.50 and $287.50. This itemized bill also included Heritage’s tab for airline tickets, accommodations at other resorts, and additional cash advances to Anka. The total: more than $38,000.
Imagine their surprise when More Than Travel’s owners learned that Anka was not part of the tourism industry but was instead the trade name for Heritage Press, owned not by oil businessmen but solely by its eponym, Anita Kapiloff. Imagine their astonishment when every check they’d cut to Anka came back endorsed to Jerry Kapiloff, who, with his mother and various guests, had spent the money on yachting adventures and accommodations at villas in Acapulco and various Caribbean resorts. And imagine More Than Travel’s alarm after they received no payments when the account came due. (A lawsuit filed last year by Waters Travel Service, resulting in a $4,953.30 judgment for the plaintiff, tells a remarkably similar tale.)
Bralove says the matter was reported to the Montgomery County check-and-fraud squad. Kapiloff initially denied everything—including the debt—but Bralove adds that the matter was resolved when Kapiloff consented to acknowledge the debt and repay it.
According to one person familiar with the Anka/Heritage chapter of Kapiloff’s career, it differed from previous ventures perhaps only in one significant way: the staggering amount of debt that was incurred.
This debt, along with a July 1990 fire that destroyed much of the company’s assets, forced Heritage Press into bankruptcy court in February 1991. At the time of liquidation, according to papers on file at bankruptcy court, Heritage Press owed $1.4 million to various creditors, from the federal government ($76,064.38 in back taxes) to Dynasty Disposal ($75). Eight travel agencies—including U.S. Travel Systems, for $156,305 in unpaid goods and services—were listed as creditors, although the bulk of claims in the bankruptcy proceeds were from assorted printing and copying firms with which Anka/Heritage had done business.
The fire no doubt hurt Heritage, but the bankruptcy papers show that the firm was in financial trouble long before flames broke out. For example, a judgment was entered in 1989 for nearly $18,000 in unpaid federal taxes, and Kapiloff was also being sued for over $177,000 for failing to pay the promissory note he had signed to initially buy the business.
At least once during the Anka ordeal, Kapiloff received a court order to vacate his residence for nonpayment of rent. Two years later (a few months after the fire), he was sued for not paying the $1,900-a-month rent on his new address. He apparently moved out, since the following year he was forced by the court to vacate yet another residence for nonpayment of a $1,450-a-month tab. (Kapiloff’s mother, who had signed the lease, was named in that suit as the defendant, but Jerry was a tenant.)
D.C. Landlord-Tenant Court records show another suit that same year, but the case file was not available for inspection. However, the record of his most recent suit for nonpayment of rent—on a Chevy Chase residence last year—shows that Kapiloff countersued: He claimed he had stopped writing rent checks because the landlord had refused to clean a sewage backup in the basement, making the place uninhabitable. According to court records, both suits were dropped when Kapiloff moved out.
A source close to the whole saga says that shortly after the demise of Anka/Heritage, Kapiloff started Sterling Graphics, the printing brokerage he had told Fred Cherney he was now running. It defies common sense, but the law allows businessmen to launch a new venture while the bankruptcy waters are still rippling. If someone incurs debt in the name of his corporation, he can still maintain an unblemished personal credit rec ord. His personal bank account is shielded from most judgments handed down against the company.
“You start a new business with a new name,” says attorney Eugene Ebert, “and you’ll get new credit.”
Kapiloff apparently was well schooled in the nuances of bankruptcy, because he used the law to his advantage. As attorney Deering put it in his most recent suit against his former client, “[Kapiloff] continuously develops new corporations, incurs debts through those corporations, and subsequently dissolves the corporations leaving a large amount of unpaid debt in order to defeat the just demands against himself and his corporations.”
But even a personal judgment or bankruptcy isn’t the end. “It’s one of the true anomalies that people can go through a personal bankruptcy and literally the next day find someone who’s so desperate they’ll extend credit,” says bankruptcy attorney Jeffrey M. Sherman, who’s seen more than one client find such willing backers.
Old creditors like Economy Printing Services tried to garnish Sterling Graphics’ accounts for the $40,000 still owed by Anka, and Kapiloff’s new business quickly mounted additional debt. Printing Impressions of Rockville secured a $711.55 judgment against Sterling in January 1992, and that August, Chevy Chase Executive Services won a judgment against Kapiloff for over $5,000 in unpaid office-space rent and services.
The unhappy wanderer then moved his operations to Washington Harbour, although he hardly got out of harm’s way: Soon after his arrival, Rogers VR Enterprises won a $2,217.50 judgment against him. The Hyatt Regency Hotel in Cerromar Beach, Puerto Rico, won a personal judgment against him for $4,451.92 (Chicago’s Ritz-Carlton had gotten him three years earlier for $1,100.72). Local printer Scott Watkins tried in vain to collect $35,000 for work his firm had done for Sterling Graphics, and, at about this time, Fred Cherney joined the luckless group of Kapiloff debtors.
On top of everything else, Kapiloff was forced to initiate litigation in June 1992 after a former employee allegedly tried to steal away clients for her own new business. He had gone on the offensive before, but it’s apparently not a role to which he’s accustomed. In a handwritten complaint he filed himself last year in D.C. Small Claims Court, more than once Kapiloff refers to himself as “defendant,” when in fact he is the plaintiff.
J erry Kapiloff is on the phone. The hope is to find out why he has had such phenomenal bad luck with debt, and the Diana’s suit is raised first.
“Are you sure you have the right person?” he asks. He is assured that court records confirm him as such, but he then explains that the story told in court records is not as simple as it may seem.
“When [the Diana’s stockholders] attempted to sell me that company, they did so erroneously and nobody knew it until after the fact,” he insists. “They withheld an enormous amount of information prior to selling that company.” Which is why, he says, he countersued, alleging that the sellers had defrauded him into believing the company was in better financial shape than it really was. He adds that before the whole thing was over, “I lost a ton of money of my own,” and then curtly refers further questions to Deering, the attorney who had to sue to get his fee after representing Kapiloff in the case.
Deering declines to comment, except to confirm Kapiloff’s countersuit against the Diana’s stockholders, which was dropped when the attempt to buy peace was offered. But one of Kapiloff’s former attorneys adds, “I don’t doubt he lost money [in Diana’s]. He’s lost a lot of money—his mother’s, rather—in almost all his ventures.”
Kapiloff and his mother shared in the dissolution of Gerald Kapiloff Sr.’s estate after he died on June 24, 1974. Left behind were $310 worth of jewelry, about $115 in cash, and 250 shares of his closely held company, General Chemical Corp. He bequeathed 138 shares of the stock—valued by the probate court at more than $104,000—to Anita, and the remaining 112 shares—an estimated $85,000 worth—to Gerald Jr.
Anita and her son took over the operations of General Chemical, and in 1977 they put up their inherited stock as collateral for an undetermined business loan. But they apparently were unable to make the operation profitable, and by 1979 the company was in the thick of bankruptcy proceedings. The trustee handling the bankruptcy later determined that General Chemical’s sole asset—the stock being held as collateral—was worthless.
But even if Anita somehow managed to come away from that episode with a hefty sum, it obviously wasn’t enough: Her Chevy Chase condominium was foreclosed on a few years ago. Her last known address was at the posh Colonnade on New Mexico Avenue, where she rented from a unit owner. Residents recall a pleasant woman who talked frequently about “moving to Florida any day now.” Perhaps she did. She vacated the apartment almost a year ago and left no forwarding address.
Jerry Kapiloff doesn’t want to talk about his personal life, however; in fact, he doesn’t really want to talk about anything. But before hanging up, the case of More Than Travel, in which he was accused of misrepresenting Anka as a villa-rental organization run by oil businessmen, is broached.
Kapiloff quickly cuts in: “They were paid,” he says. Indeed they were. More Than Travel’s attorney Bralove says his client recently received the last installment, fulfilling the judgment. But, Bralove adds, “Mr. Kapiloff was in default [of the judgment] almost from the beginning, never meeting the payment amounts….When the case [against him] was put back on the docket, guess what? The payments came.”
Kapiloff is asked about the allegations of deceit and fraud in the original complaint, but he cuts in again: “I didn’t own Anka, I just worked there.” At this point, he doesn’t wish to talk any further and hangs up. But 20 minutes later, after he calls Deering, Kapiloff is back on the line saying—very pleasantly—that he didn’t mean to sound rude before, was there anything else that needed to be answered?
“Is it typical for a small-businessman to have had the number of lawsuits you’ve had?”
“Business people go through business problems,” he says. “When you’re involved in a company that goes through various different problems, people, whether they’re owners or not, sometimes get dragged into those things. And that did happen to me. I have suffered because of it, and I am doing my best to take care of those problems and pay my way out the way I did with Bralove. I just want to pay off my debts and move on with my life.”
Does that mean Fred Cherney will be getting his $7,500? For a moment, Kapiloff is nonplused. But then he says, “I’d be glad to write Mr. Cherney a check today—if he could find my artwork. My artwork was three-quarters of the job I supplied him with, and he lost it all.”
“What artwork?” asks a confused Cherney when this is relayed to him. All he has, he says, are some computer codes that Kapiloff gave him to print onto some children’s coloring books—books that were designed, it turns out, by a small publishing house Kapiloff had recently started with his mother. The same house already has a judgment against it for not repaying the $15,000 borrowed to get it rolling.
“I told Jerry I’d give him the codes back when he paid up,” Cherney says. “Funny. He’s never mentioned this before.”
Three requests—by fax, mail, and telephone—for a more detailed follow-up interview with Kapiloff get no response. Dropping in on him at his Washington Harbour office also proves useless: His landlord says he hasn’t been in for several weeks and that no one knows where he is. No one will confirm whether his rent is currently paid or if Sterling Graphics is even still operating.
Next stop, in mid-March, is the post office. The clerk at the Friendship Heights station, which handles delivery for Washington Harbour, gets on the phone to the section that processes mail-forwardings. He hangs up and says that Kapiloff recently put a hold on his mail and indicated he would be filing a forwarding address soon, but hasn’t yet. The clerk also says, based on the conversation with his colleague, “Seems like you’re not the first one inquiring.”
Indeed. It turns out that at least two of Sterling Graphics’ creditors say they have been recently contacted by the FBI about Kapiloff. Scott Watkins, the Virginia printer, was pleased to hear of the FBI’s interest since he hasn’t bothered to sue for the same reason Cherney hasn’t: the futility of it all.
One lesson of the Kapiloff saga is that a true deadbeat will pay up, but only if his pursuers are savvy or tenacious enough to concoct an effective endgame strategy. You can demand payment, but expect a deaf ear. You can hire a collection agency, but results are hardly automatic. You can threaten court action, file the suit, and serve the papers, and still not gain any satisfaction. You can even win a judgment, only to find yourself with nothing for your troubles but a bill from your attorney. If there were a debtor’s prison, those owed money might have someleverage. For the time being, the threat of criminal prosecution may be their only truly effective weapon.
Even Richard Gins, a debtor attorney (see sidebar), will concede there are people who are outright cheating the system. But he also maintains that “their number is very small. You can count them on one hand.”
The good news is that no one denies the number is small. The bad news is that you don’t have to be a criminal or even a seasoned deadbeat to make it difficult to collect. All you have to do is disagree. As one of Kapiloff’s former attorneys says, “Our system of [debt] law is primarily geared only toward people who cooperate with it. If you do not cooperate with the system, then you cannot be affected by the system.”
Just ask Fred Cherney. Or Scott Watkins. Or Rogers VR Enterprises. Or Economy Printing Services. Or any other member of that not-so-exclusive VOK Club.
Art accompanying story in the printed newspaper is not available in this archive: Phograph by Dianne Strauss.