Ex-CEO's Assets Are Frozen
By Patrick Cronin
Hampton Union, Friday, June 23, 2006
[The following article is courtesy of the Hampton Union and Seacoast Online.]
HAMPTON -- A federal bankruptcy judge has issued a temporary restraining order essentially freezing the assets of Stephen Foss, former chairman and CEO of Foss Manufacturing Co., and his wife, Patricia Foss.
Judge Michael Deasy stated in the order that if the couple continues to liquidate and transfer their assets to undisclosed locations it may cause "irreparable harm" to creditors who filed a civil suit two weeks ago against the couple and other former company officials. The creditors' suit seeks restitution for money allegedly taken from the Hampton-based company for personal use, even when company officials knew it was near bankruptcy.
The temporary restraining order, which forbids Stephen and Patricia Foss from disposing of any assets besides those needed for ordinary living expenses, will remain in effect until a hearing on the matter is held July 6.
Robert J. Feinstein, an attorney for the creditors, said the request was made out of concern that Foss and his wife were liquidating their assets for the purpose of hiding money in offshore accounts.
Evidence in support of the order included Patricia Foss' admission during a deposition that she and her husband sold their Naples, Fla., home for $7 million, but she refused to say where the money went.
Another property owned by Stephen and Patricia Foss in Rye was conveyed to an entity named EHT-LLC. When Stephen Foss was questioned in a deposition about the sales and transfers, he invoked his Fifth Amendment rights against self-incrimination.
"If further transfers were to occur, they could render any judgment rendered in the civil proceeding against the Foss defendants uncollectible, to the irreparable harm of the debtor's bankruptcy estate and its creditors," stated Feinstein, who said the couple's home in Rye was also currently on the market.
While Judge Deasy agreed to issue the restraining order, he did not agree the couple should be put on a monthly budget until civil proceedings conclude as Feinstein requested.
Foss Manufacturing filed for bankruptcy last September after its chief lender, CapitalSource Finance, cut off credit, alleging the company fraudulently borrowed millions of dollars to benefit itself and company insiders. Foss Manufacturing was sold this spring through bankruptcy proceedings and is now operating as Felt Manufacturing.
The company, which manufactures no-woven fibers, was sold for $39 million, and that money was used to pay off secured creditors, leaving unsecured creditors $15 million in the hole.
Creditors filed a 114-page complaint against the couple and other company officials in an attempt to collect that money. The suit claims, among other things, the former board of directors failed to live up to its duties and that company money was wasted in excessive salaries, bonuses, illegal preferred stock dividends and for personal uses unrelated to business operations.