By Patrick Cronin
Hampton Union, Tuesday, January 17, 2006
[The following article is courtesy of the Hampton Union and Seacoast Online.]
HAMPTON -- Creditors of a bankrupt Foss Manufacturing will be able to conduct an investigation into allegations that former Chief Executive Officer Steven Foss used company money as his own personal "piggy bank."
The company's creditors were given permission on Thursday by a bankruptcy Judge Michael Deasy to investigate not only Foss, but his wife and daughter and other former and current officers of the company.
Paul Daley, who represents Stephen Foss, said in court documents the investigation is nothing more than a "fishing expedition" to get dirt to file a civil suit against in client."I can't really comment on the case because Mr. Foss is a target for litigation," Daley said.
According to court documents, Foss denied any wrongdoing and said his name would be cleared if a suit is filed against him.
The creditors group said its preliminary investigation shows Foss was using company money to pay for personal reasons such as home improvements, club memberships and use of the company's private jet.
More than $180,000 in company funds were used for improvements to the home of Foss' daughter Jenifer Smith, creditors said. In the year prior to bankruptcy, the company also made more than $150,000 in payments on American Express cards to Foss' daughter and former chief financial officer Kevin Sexton, they said.
They also alleged a company-owned home currently houses the housekeeper to the Foss family.
Lawyer Paul Moore, who represented Foss' daughter and wife at the hearing, called them victims.
"I would like the innuendo to stop," Moore said. "I'm quite confident they're going to find absolutely nothing involving my clients."
Foss Manufacturing filed for bankruptcy in September after its chief lender, CapitalSource Finance, cut off credit, alleging the company fraudulently borrowed millions of dollars to benefit itself and company insiders.
CapitalSource Finance, which holds a $30 million claim against the company, was already granted permission to conduct an investigation at the end of December.
This past Thursday, Judge Deasy ordered the creditors committee and CapitalSourcse to work together, so they are not asking the same questions twice.
The Hampton-based company with 375 employees manufactures non-woven fabrics and synthetic fibers.
Currently, the trustee hired to run Foss Manufacturing during its bankruptcy is looking for potential buyers of the company.
The board of directors requested a trustee to run the company because of friction between the board and CapitalSource.
Information from the Associated Press was used in this report.