New wrinkle in Foss attachment attempt
Creditors trying to attach the New Hampshire financial assets of the former chief executive of Foss Manufacturing may have come up empty.
Stephen Foss, accused of looting the Hampton company while it was insolvent, has more than a million dollars in Fidelity Investments, the mutual fund disclosed Monday, but those assets may be shielded by state law. Creditors would only be able to attach them if they can prove that they were fraudulently transferred.
Foss, which declared bankruptcy in August of 2005, was sold as a going concern to a group of private investors in April for $39 million. That was enough money for the bankrupt shell – Felt Manufacturing — to pay off secured creditors in full, but with nothing left over for unsecured creditors, who claim they are owed more than $15 million.
A bankruptcy judge already approved the attachment of Foss’ Hampton home for more than $3 million, ruling that creditors are likely to succeed in their claims for at least that amount. But the creditors, arguing that his share in the home is worth much less than that, asked the bankruptcy court to attached his assets in three new Hampshire financial institutions.
But only one bank – Citizens – disclosed that Foss had any assets at all – a little more than $300. And Fidelity disclosed less than $5,000 in brokerage accounts that were not part of Foss’s IRA.
Fidelity did report that Foss had assets worth approximately $224,000 in a SEP IRA and $835,000 in a traditional IRA, but Foss’ attorney’s have argued that IRA assets are exempt.
Attorneys would have to show that Foss had moved the assets into an IRA in an attempt to shield them from creditors in order to be able to attach them, according to New Hampshire law.
Further complicating the matter is the fact that Foss now claims a Florida residency, so it is unclear whether New Hampshire law even applies.
Fidelity agreed to freeze the assets pending an order from the court. The mutual fund said that it does not plan to make an appearance before the court and get involved in the dispute.
Meanwhile, Foss, family members and other former Foss Manufacturing officials, have moved to dismiss many of the charges, arguing that they weren’t specific. Attorneys for the creditors filed a lengthy answer, arguing that the charges were specific enough, and the defendants didn’t dispute many of them.
The bankruptcy court has schedule a hearing on the dismissal charges later this month. – BOB SANDERS