Court filings depict Lasky cash drain Siphoning alleged by trustees in bankruptcy case

Psychic Friends and horses

NationsBank deal to keep Inphomation in business longer

Litigation

June 01, 1998|By William Patalon III | William Patalon III,SUN STAFF

As his company was slipping into bankruptcy and creditors were going unpaid, Psychic Friends Network operator Michael W. Lasky was funneling money out of his now-bankrupt Inphomation Communications Inc. and into such things as the Harbor Inn Pier 5, Regi's Bar & Restaurant, his Laurelford Court home in Hunt Valley, a stable of racehorses, a 55-foot yacht and $466,000 in cars and trucks, court-appointed trustees allege in documents filed in the bankruptcy case.

In a related matter, Inphomation's bankruptcy trustee, Linowes & Blocher attorney Paul-Michael Sweeney, also struck a deal with NationsBank NA, a lender to both Lasky and Inphomation, that will let the Pikesville-based telemarketing firm stay in business at least until Friday.

In a lawsuit separate from the bankruptcy case, NationsBank had obtained a court judgment against Lasky and Inphomation that technically would let the bank seize all the company's cash. But the agreement with the trustee lets Inphomation keep the desperately needed cash as working capital, though it places the company on a strict budget that's monitored by Sweeney and NationsBank.

Despite all the turmoil, Sweeney said, the infomercial company that employs telephone psychics is still a going concern, running its Psychic Friends Network even as it goes after money it is owed on unpaid bills. And he says the company's potential for a long-term rebound are surprisingly strong.

"It's still operating -- absolutely," Sweeney said. "Its prospects are looking very good."

Inphomation filed for Chapter 11 bankruptcy protection Feb. 2, claiming assets of $1.2 million and liabilities of $26 million. According to the documents filed recently in U.S. Bankruptcy Court here, the court-appointed trustee agrees that the company has $26 million in liabilities.

But, with the siphoned-off money figured in, the trustee claims that Inphomation has assets of at least $19.8 million. And that figure doesn't include any of Lasky's personal interests in such things as the Harbor Inn, Regi's, the Lasky home and the horses, the court records state.

Not signed by trustee

Lasky's bankruptcy lawyer, James C. Olson, noted that the documents were not signed by Sweeney, which technically means that they've not been endorsed by the trustee, meaning that the court cannot act on them.

Olson wonders if they were filed as a "gambit" -- a tactical attempt to get bargaining under way.

"I view this as: 'Let's run it up the flagpole and see who salutes,' " Olson said.

Sweeney, appointed trustee after creditors persuaded a judge that Lasky was not trustworthy enough to attempt a financial turnaround unsupervised, declined comment on the court filings, stating that they "speak for themselves."

But the court papers hint at a paper trail showing that Lasky took Inphomation money -- money now owed to creditors -- and used it to finance an indulgent lifestyle: A $130,000 Aston Martin, a $450,000 yacht, racehorses, artwork, family-run foundations and offshore bank accounts. Other items included personal interests businesses such as the Harbor Inn.

A filing such as Inphomation's made under Chapter 11 of the U.S. bankruptcy code gives a company relief from creditors and time to craft a turnaround plan.

'Debtor in possession'

Typically, in a situation known as "debtor in possession," the company's management is allowed to stay at the helm and try to work out the company's problems.

However, after a two-day hearing in mid-February, U.S. Bankruptcy Judge James F. Schneider ruled that an outside trustee be put into place to operate Inphomation.

Testimony showed that Lasky tried to take Inphomation assets -- including its valuable list of customers who were willing to pay for over-the-telephone advice from psychics -- and put them into an independent shell company called Friends to Friends Ltd.

That new shell corporation, formed shortly before the bankruptcy filing, conceivably could have been used to strip Inphomation clean.

Those actions evoked an unusually stern rebuke from Schneider, the presiding judge at the February trustee hearing.

"I've heard nothing but evidence of concealment, dishonesty and less-than-full disclosure," Schneider said. "In some cases, I think I've heard evidence of criminal activity."

Sweeney, the trustee, would not say whether he planned to try and reclaim cash from assets such as the horses, hotel or Lasky's house, or what the prospects for success would be should he decide to do so.

If the trustee does decide to press these allegations, Lasky will oppose them, his attorney says.

Lasky "does not agree with the trustee's characterization of these things," Olson said. "I don't even know to what extent the trustee really agrees with them," since they are not signed.

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