By Patrick Cronin
Hampton Union, Tuesday, July 11, 2006
[The following article is courtesy of the Hampton Union and Seacoast Online.]
HAMPTON -- A federal bankruptcy judge is considering whether to issue a permanent restraining order that would essentially freeze the assets of Stephen Foss, former chairman and CEO of Foss Manufacturing Co., and his wife, Patricia Foss.
Judge Michael Deasy said during a hearing on the matter last week that the temporary restraining order issued two weeks ago will remain in effect until he releases his final decision.
Creditors asked for the restraining order last month because they said if the couple continues to liquidate and transfer assets to undisclosed locations it may cause "irreparable harm" in a civil suit they filed two weeks ago against the couple and other former company officials.
Creditors filed suit last month seeking to recover from Foss, his family and other former company officials some of the $15 million they claim was used for personal use, even when those officials knew the company was near bankruptcy.While a bankruptcy trustee sold the Hampton-based company for $39 million, the money was only used to pay off secured creditors, leaving unsecured creditors empty-handed.
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.
Robert J. Feinstein, an attorney for the creditors, said at the hearing they made the request for the restraining order because there was a 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.
According to court documents, Stephen Foss said while he would not object to the court's earlier order to freeze his assets, he wants to be able to spend those assets on living, business and legal expenses.
He also denied the creditors' accusations that he was trying to conceal his assets and was opposed to the suggestion that the couple be put on a monthly budget.
Patricia Foss also denied trying to hide assets. According to court documents, she admitted she was selling property, but said that was because the couple no longer had income coming in. The assets are not in "offshore accounts" and that she plans on using the funds for living and medical expenses.
Patricia Foss said she is suffering from amyotrophic lateral sclerosis, or Lou Gehrig's disease, and that if her assets are frozen it may affect her ability to treat her disease.
She also argued she shouldn't be held liable in any case because she was a board member for fewer than six months and had no clue what her husband was doing.
After the hearing, Deasy said he was taking the matter under submission and that the temporary restraining order dated June 15, 2006, would remain in effect pending a further order from the court.