Coleman Craten assets frozen

As co-founder files for bankruptcy, suit says $2 million embezzled

May 11, 1999|By Sean Somerville and Bill Atkinson | Sean Somerville and Bill Atkinson,SUN STAFF

A Baltimore Circuit Court judge has appointed a receiver to take over operation of Coleman Craten LLC after an elderly Towson couple accused the beleaguered downtown brokerage firm and its co-founder, Monica Coleman, of embezzling $2 million in their retirement funds.

The judge issued the order Friday at the request of James R. and Carol J. Hyde of Towson, who had sought emergency action earlier that day.

The order came less than an hour after Monica Coleman filed for bankruptcy under Chapter 7 in U.S. Bankruptcy Court, which provides for the liquidation of assets, according to court documents that became available yesterday.

Circuit Judge Joseph H. H. Kaplan appointed Financial Conservators Inc. as the receiver about 45 minutes after Coleman filed a three-page petition for bankruptcy protection.

The receiver said yesterday he was just beginning to assess the firm's condition.

"It will probably be several weeks before we have a clear picture," said G. Richard Gray, president of Financial Conservators, who was appointed receiver of Coleman Craten. "I will try to determine what the assets are and what the liabilities are."

Gray said last night he had not spoken to Coleman. "I am hoping to speak with her," he said.

He said four people were working at the firm when he arrived. He dismissed two -- a receptionist and an economist.

A call to Coleman was not answered. Her lawyers, David King and Maura DeMouy, said they would not answer questions.

The development represents the gravest threat to Coleman Craten LLC, the company that promised to provide extensive financial services in a stately downtown club.

Before last week, Coleman and her company faced seven lawsuits seeking more than $2 million, including two filed by investors who allege that she defrauded them.

In addition to the lawsuits, the firm faces an investigation by the Maryland Securities Division and possible eviction from its city-owned headquarters building at 7 E. Redwood St. for failing to pay rent and a $650,000 security deposit.

The Hydes' lawsuit, which names Coleman and the company as defendants, brings to more than $4 million the amount of money plaintiffs are seeking from Coleman Craten.

The bankruptcy filing also halted the scheduled foreclosure sale yesterday of two waterfront properties owned by Coleman, who founded the company with partner John G. Craten in February 1998. The properties, one of them her residence, were set to be auctioned after she failed to pay more than $1.8 million in principal and interest.

In her three-page filing, Coleman estimated the number of creditors between 16 and 49. She lists assets and debts ranging from $1 million to $10 million.

Among the 16 creditors named in the filing are: Dr. Watson Kime, a St. Michael's physician who lent her more than $1 million from his individual retirement account to buy the two Pasadena properties; Dr. Shahid and Jean Aziz, a Columbia couple who say they are owed $765,000 they invested in Coleman Craten and $640,000 in interest; and Charles Schwab & Co., which says it is owed $431,000 in a loss that resulted from a bounced check.

In their Circuit Court complaint, the Hydes say they started working with Monica Coleman and John Craten in the summer of 1997, when the two were working at Legg Mason Wood Walker Inc. The Hydes said the pair managed accounts for them, first at Legg Mason and later at Charles Schwab.

In January, the Hydes told Monica Coleman that they planned to retire in May, and wanted to transfer some of their assets to income-bearing marketable securities, their court complaint said. The couple liquidated some of their investments and wrote Coleman a check for $2 million, which was to be held in escrow and invested in securities, the complaint said.

In April, the couple asked Coleman for $400,000 and received a check, signed by Coleman, that bounced. NationsBank Corp. told the couple May 6 that the account was closed, according to the complaint.

The Hydes, who repeatedly demanded their money without success, say it was never invested in securities. Instead, the couple's complaint alleges, the money was "embezzled, confiscated and/or misappropriated by the defendants for their own use and benefit."

On Friday, Kaplan also issued a temporary restraining order directing Coleman Craten and Coleman to return any portion of the Hydes' investment in the firm's possession; prohibiting the disposal of assets in which the Hydes have an interest, and requiring the receiver's consent to cancel contracts or dispose of records.

Pub Date: 5/11/99

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