Bankruptcy judge freezes Foss assets
A federal bankruptcy judge said Thursday he would issue an order essentially freezing the assets of Stephen Foss, the former chairman and CEO of Foss Manufacturing Company, and his wife, Patricia Foss.
Judge J. Michael Deasy, said that if the Fosses transfer assets it may cause “irreparable harm” to the cause of creditors. He restrained the couple from disposing of any assets besides those that are needed for ordinary living expenses, at least until a preliminary hearing on the matter is held July 6.
The Official Committee of Unsecured Creditors filed suit Monday to get back the money that that it alleges the Fosses illegally took from the Hampton company for personal use, even when they knew the firm was going broke.
A group of private investors bought Foss Manufacturing’s assets in April for $39 million as a going concern leaving behind a bankrupt shell renamed Felt Manufacturing Company. Felt was able to pay off its secured creditors in full, but unsecured creditors are still left some $15 million in the hole.
The creditor committee said it was concerned about the assets, said attorney Robert J. Feinstein, after it learned from Patricia Foss in a deposition that the couple sold a home for $7 million and refused to say where the money went. Stephen Foss invoked his 5th Amendment rights against self-incrimination in his testimony concerning the sale.
A civil judge – unlike a criminal judge — can take such an action into consideration, Deasy said.
“He’s entitled to take the 5th, and I’m entitled to take inference from it,” he said. “Especially with substantial proceeds” that are “far beyond that what is needed to live in any lifestyle.”
While the 114 complaints filed on Monday represented a “shotgun of issues,” Deasy said, the “likelihood of success on some of them is significant.”
Deasy did put off Feinstein’s attempt to put the Fosses on a monthly budget.
“We need something more than a mere restraining order,” said Feinstein, saying that the assets might be whisked away otherwise.
Deasy said that both sides need time to work out a budget, and that subject should be discussed at the July 6 hearing.
Paul Daley, Foss’s Boston-based attorney, did not show up for the hearing. Indeed, he wouldn’t even accept the official serving of the lawsuit, prompting Deasy to remark of Foss, “Are you going to have to leap out of the bushes to serve him?”
Daley later would only say, “Our client did not authorize us to accept it,” and declined further comment because the matter was in litigation.
Patricia Foss’ attorney, Bonnie Kelley, did appear at the hearing, but did not raise any objection to the temporary restraining order. She also declined comment.
At one point, Feinstein asked Kelley, “Where is the $7 million?”
But Deasy said that those kinds of questions should be saved for the July hearing, when – among other things – the judge will determine whether it would be necessary to attach any judgment to the Fosses’ other property. – BOB SANDERS
