USA Springs case may not be completely dead yet
Bankruptcy trustee is seeking bankruptcy court OK for permission to hire a lawyer to explore whether it makes sense to pursue proceeds of an $8.4m loan
The bankruptcy trustee is reviving a creditor lawsuit against former board members and other investors of USA Springs, alleging “fraudulent transfers” of the proceeds of an $8.4 million loan the New Hampshire company obtained in March 2007, less than two years after it filed for bankruptcy.
The trustee is asking the bankruptcy court in Manchester for permission to hire a Massachusetts lawyer on a contingency basis to see if it makes sense to pursue the money, which accounts for 42 percent of the loan, according to the complaint originally filed in June 2010.
The loan – granted by Roswell Commercial Mortgage — was the last attempt to finance the controversial bottling plant in Nottingham, which faced oppositions from residents opposed to plan to bottle about 300,000 gallons of groundwater a day and sell it overseas. Opponents said there wouldn’t be enough water for their own wells.
The company got its permit, but filed for bankruptcy in 2008, leaving a partially finished bottling plant. Adversary proceeding against USA Springs President Francesco Rotondo and other insiders had remained dormant as the company tried to obtain enough financing to continue the business or to sell via bankruptcy.
But those attempts failed in spectacular fashion. One of the firm’s would-be financiers – the Swiss company, Malom Group — walked off with $1.2 million of investors’ money after promising to grant a $60 million loan. Swiss authorities are now investigating whether Malom was involved in a multimillion-dollar international fraud scheme. The bankruptcy court granted the trustee for USA Springs a $60 million judgment against Malom, but other investors who allege Malom defrauded them are also demanding compensation.
The adversary lawsuit has nothing to do with Malom, however. It alleges USA Springs transferred some $2.6 million of the $8.4 million in proceeds received from the 2007 Roswell loan for dubious “mortgage and loan payoffs” to shareholders, insiders and lenders to the debtor.
At the time, said the lawsuit, the company was basically insolvent, with no income, no money and a property that was over-appraised and already mortgaged to the hilt. In addition, some of the shareholders – though they said they were paid in full in the proceeds – put in claims to the bankrupt estate asserting that they are owed even more money, the suit said.
The USA Springs estate currently doesn’t have any assets, so it couldn’t promise to pay an attorney to pursue the assets, and the creditors’ attorney, Michael A. Fagone, wouldn’t take the case on a contingency basis. So the trustee is proposing to hire a Boston attorney, Ryan C. Siden, who will. The court will decide the matter after holding a hearing scheduled for August.
Rotondo told NHBR he doesn’t hold much stock in the proceedings, which he said was another example of lawyers, whom he called “criminal professionals,” trying to “rob me of my company.”
“The more they mention fraudulent transactions, the more they are digging away their own grave,” he said.
As for selling the USA Springs business, he said, “Nobody wants it. It’s too much of a f—– mess.”