By Patrick Cronin
Hampton Union, Tuesday, September 20, 2005
[The following article is courtesy of the Hampton Union and Seacoast Online.]
HAMPTON -- Foss Manufacturing is filing for Chapter 11 bankruptcy protection and, according to court documents, President and Chief Executive Officer Stephen Foss resigned after allegations of fraud within the company came to light.
The company, which has its headquarters on Lafayette Road in Hampton, announced Monday that it filed a petition on Sept. 16 for relief in the U.S. Bankruptcy Court in Manchester.
According to a press release, the company's manufacturing facility will remain in operation during Chapter 11, and the company anticipates no employee layoffs or consumer disruptions.
The bankruptcy filing was spawned by the refusal of the company's senior lender, CapitalSource Finance LLC, to continue to fund the company's day-to-day operations, according to the release.
CapitalSource Finance is accusing Foss of providing misleading financial information over the last several months that led CapitalSource to over-advance millions of dollars to the company.
Foss Manufacturing admitted in court documents that information given to CapitalSource Finance was incorrect, and that is why Foss asked for and received the resignation of Stephen Foss.
Foss's former chief financial officer resigned in April, according to court documents.
The finance company is objecting to the company's bankruptcy petition because, it alleges, the board of directors was in on fraud. The company is now under control of Stephen Foss's wife and daughter, according to the court documents.
Chapter 11 is designed to provide companies with the time and opportunity to reorganize their operations, restructure debts, obtain new investment capital or facilitate a sale of all or part of the company on a going concern basis.
As for Stephen Foss, the company was not being specific as late as Monday afternoon.
"The only information that was given to me is that Mr. Foss has retired," said Glenn Schwartz of the Boston public relations firm of Fleishman-Hillard.
Attorney Andrew Schwartz of Foley Hoag LLP of Boston, who is representing Foss Manufacturing in its bankruptcy case, also confirmed Foss is no longer with the company, but didn't say why.
"In connection with the bankruptcy, the company is retaining Woolard Harris of the Carl Marks Consulting Group as its chief restructuring officer, " Schwartz said.
According to a press release, Foss has filed a request that the bankruptcy court approve the use of cash collateral to provide working capital for its operations.
A U.S. Bankruptcy Court judge ruled that the company can spend cash to keep it operating.
Foss Manufacturing, which is a privately held company, has usually been unwilling to talk about matters of income, how many employees it has, and the identity of clients it serves.
In 2004, Foss Manufacturing laid off 150 employees. At the time, Foss said the layoffs were "purely seasonal" and that he was expecting to bring everybody back after the New Year's holiday.
A former employee, who was one of the 150 laid off, said he's still without a job and that "only half a dozen have been hired back."
Foss was founded in 1954 in Haverhill, Mass., by Woody Foss. The company began making heel and shoe stiffeners for shoes and evolved to fiber production in 1980.
With facilities in North America, Europe, Asia and Australia, Foss is a significant supplier to the Automotove Technical, Decorative, Fibers and Retail industries worldwide.