Coleman relates plan for solvency

Founder of failed firm tells court $5 million loan is forthcoming

Bankruptcy

July 24, 1999|By Sean Somerville | Sean Somerville,SUN STAFF

The founder of the bankrupt investment firm Coleman Craten LLC emerged for the first time in federal bankruptcy court yesterday and said she has a plan to pay off creditors who are owed at least $5.9 million.

"I have been working with a gentleman to secure solvency, not only for myself personally, but Coleman Craten," Monica Coleman told Judge E. Stephen Derby in U.S. Bankruptcy Court in Baltimore.

Wearing a blue business suit and appearing without a lawyer, Coleman did not identify the benefactor or provide documentation that a $5 million loan she mentioned was forthcoming.

Derby and lawyers for Lori Simpson, the trustee in the Chapter 7 bankruptcy cases of Coleman and the company she founded with John G. Craten, reacted warily.

"If the debtor has an offer that would assist the trustee in paying creditors, that is something we would consider," said John Carlton, the trustee's lawyer. "This is also something we have been listening to since the bankruptcy was filed."

Derby said, "You can't create solvency by borrowing money. You can simply get cash. That's all you accomplish with borrowing money."

Coleman's appearance coincided with her last-minute motion to block the sale of her two Pasadena homes in 30 days for a minimum of $950,000, an argument she lost when Derby ordered the auction of 415 and 417

Edgewater Road.

In a written motion and her court appearance, Coleman didn't limit her comments to the auction. Coleman said she was working with "a Realtor group" to sell the properties for $1.8 million and made several accusations against Simpson.

Coleman said Simpson allowed the properties to deteriorate and be burglarized. She also said Simpson blocked potential buyers from the homes by evicting Monica Coleman and her husband, Richard.

Coleman also said Simpson denied her access to records she said she needed to prepare financial statements. "It is impossible for me to prepare schedules or participate with them in any way when they have everything that I own and all my documents," she said.

In addition, Coleman accused Simpson of endangering the purported $5 million loan by assisting in the publication of an article in The Sun that Coleman called "scandalous."

Carlton, the attorney representing Simpson, denied Coleman's accusations but declined to comment more specifically, saying Coleman might be preparing a legal action.

Coleman, who has declined written and oral requests for interviews, would not answer a Sun reporter's questions yesterday. "I have nothing to say," she said.

Coleman and the company, Coleman Craten LLC, filed for bankruptcy protection in May. The company, which promised to offer investment advice in a stately downtown club, owes creditors about $5.9 million. Her personal bankruptcy lists assets and debts between $1 million and $10 million.

Eleven lawsuits have been filed against the company and Coleman. Investors are seeking the return of $3 million.

The subject of yesterday's hearing was a joint motion to sell the two properties by Simpson and Quads Trust Co., the custodian of a doctor's individual retirement account that lent Coleman more than $1 million to buy the properties. With interest and penalties, Quads has a claim of approximately $1.8 million against Coleman.

The motion called for both houses to be auctioned for at least $950,000. If the properties do not attract bids of that amount, the motion provides for Quads to take possession and cut its claim by $950,000, leaving a claim of about $850,000.

Coleman argued that the properties have been appraised at $1.4 million. "We have a Realtor group that has been working with us to find an investor in the property for the full $1.8 million," she told Derby.

Derby told Coleman she could work on whatever plan she wanted but that he was not going to postpone the liquidation sale of the homes.

"The object is to liquidate and liquidate promptly," the judge said. "In the interim, if you are able to raise money to provide an option for the trustee, there's nothing to stop you from doing it."

Coleman said an article in The Sun that reported her use of her Fifth Amendment right against self-incrimination during a deposition almost cost her the $5 million loan from an unnamed investor.

"In the case of the $5 million loan, the trustee assisted in producing a scandalous article in The Sun Paper on June 4, knowing that the loan to Coleman was due to come to fruition on June 6, 1999," she wrote in her motion.

Coleman said she invoked her Fifth Amendment right at the direction of attorneys concerned about an investigation by Maryland's attorney general. Saying harm was caused by news reports, she asked Derby to hold proceedings about her financial plans in his chamber "to keep this information from the press."

The judge denied her request, saying it was not relevant to the proceeding.

Pub Date: 7/24/99

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