Agency seeks bankruptcy protection Charter Group files under Chapter 11

October 26, 1993|By Gary Cohn | Gary Cohn,Staff Writer

A Towson insurance agency has filed for Chapter 11 bankruptcy protection and charged its former chief executive, who disappeared mysteriously last month, with owing the company nearly $1 million.

The bankruptcy protection filing by Charter Group Inc. and three subsidiaries comes five weeks after the then-CEO, Hamilton Schmidt, 38, was reported missing amid allegations that $1.1 million was missing from the company.

In its filing in U.S. Bankruptcy Court in Baltimore, Charter Group and the subsidiaries list total liabilities of $4.6 million. The company said in the filing that its assets are not known.

Yesterday, Charter Group filed a complaint in bankruptcy court alleging that Mr. Schmidt owes the company more than $900,000 and that he "engaged in questionable financial dealings involving Charter Group's assets."

Among other things, the court papers say, Mr. Schmidt personally borrowed $110,000 in cash from an employee stock ownership plan in September 1992 and then paid the money back with company-issued stock.

The stock was worth considerably less than $110,000, said James A. Vidmar Jr., a lawyer for Charter.

In addition, the court papers say that earlier this year Mr. Schmidt improperly used $45,000 in company funds for travel, lodging and entertainment expenses for himself and his friends.

Also, Mr. Schmidt owes Charter $649,290, money that he borrowed from the company to help finance his purchase of stock in the company, the complaint states.

The court filings are the latest development in the mystery surrounding Mr. Schmidt, who joined Charter out of college and rose through the ranks to become its president, chief executive and chairman in 1990. Mr. Schmidt was last seen Sept. 14, shortly before information about Charter's financial problems became known.

The company, which had been one of the largest independent insurance agencies in the area, had recently failed to make certain loan payments and been late in paying bills.

The day after Mr. Schmidt disappeared, he sent a letter to his sister, Susan Schmidt, telling her that he was having anxiety over problems in his life and needed to get away, according to a police report.

Mr. Schmidt's disappearance sparked investigations by the Maryland Insurance Administration and the State Attorney General's Office. The investigations are continuing.

Charter Group yesterday asked the bankruptcy court to order the examination of Susan Schmidt in an effort to determine Hamilton Schmidt's "whereabouts and assets." The company also asked the court to order a similar examination of Mr. Schmidt's mother, Florence Hack.

Florence Hack declined comment. Susan Schmidt could not be reached for comment.

The Chapter 11 filing is intended to allow Charter to pay its debts in an orderly way.

It is not expected to affect customers.

The company's insurance business was purchased earlier this month by the principals of another insurance agency, Insurance Inc. of Timonium. The bankruptcy protection filing will not affect that transaction.

Customers who have paid their premiums to Charter are unaffected and their policies remain in effect, said Stewart Rosenberg, president of Insurance Inc.

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