Creditors vow seizure of Trainor assets

Ex-Novatek figure, family fail to make settlement payment

`Strip them of everything'

Medical test kit distributor mired in bankruptcy


February 15, 2000|By Mark Guidera | Mark Guidera,SUN STAFF

A lawyer for British investment house Wood Gundy London Ltd. and other creditors in the Novatek International Inc. bankruptcy case said yesterday that the group plans to begin seizing assets of Florida businessman William P. Trainor and his family as a result of their failure to make a $300,000 settlement payment.

"We plan to push forward to enforce these judgments, find assets and strip them of everything we can find," said Edward J. Meehan, of Skadden, Arps, Slate, Meagher & Flom LLP in Washington, which is representing creditors who sued the Trainors.

Trainor was one of the architects in reinventing Novatek in 1996 from a failing steel framing manufacturer to a medical test kit distributor.

FOR THE RECORD - In an article about Novatek International Inc.'s bankruptcy case published in Wednesday's editions, U.S. Bankruptcy Court Judge James F. Schneider's middle initial was incorrect. The Sun regrets the errors.

Trainor, who is representing himself in the case, could not be reached for comment. He, family members and companies he controls could be on the hook for more than $16 million under terms of the settlement.

Michael Seward, a Miami lawyer representing Trainor's wife, son and three daughters in the lawsuit, said yesterday that his clients could not explain why the payment was not made.

"We're hopeful the payment will be forthcoming so the judgments don't have to be enforced," said Seward.

"The money just isn't available" to satisfy the entire judgment, he said.

Wood Gundy and other creditors sued Trainor and his family members in 1998 for defrauding them of $8 million they claimed was siphoned out of the now-defunct Columbia-based Novatek.

Trainor and his business associate, Vincent Celentano of Florida, are accused by the Securities and Exchange Commission of taking control of the company and merging it with a shell operation in order to use it as a front to defraud shareholders and other investors.

The SEC charges that Trainor and Celentano caused Novatek's stock price to become inflated in 1996 by issuing news releases falsely claiming that the company had been awarded multimillion-dollar contracts for the test kits in Latin America. Those contracts turned out to be either nonexistent or embellished.

Trainor and Celentano had issued themselves thousands of unregistered shares in the merged company.

A trial in the SEC case against Trainor and Celentano was scheduled to begin this month but has been delayed until summer, a lawyer for the regulatory agency said.

Novatek filed for bankruptcy in 1996, and the company was de-listed from the Nasdaq small-capitalization market that year after the SEC launched a fraud investigation.

Under terms of a $2.8 million settlement agreement struck with Trainor in November, the creditors group retained the right to seize assets of Trainor and his family members if any of four installment payments on the settlement were missed. The Trainors signed "confessed judgments" agreeing to that, court records show. Trainor made good on the first payment -- $250,000 -- on Dec. 11.

A second installment on the debt, $300,000, was due Jan. 31. But Trainor failed to make the payment, said Meehan, the lawyer.

On Friday, U.S. Bankruptcy Court Judge James T. Schneider signed an order giving Wood Gundy and the other creditors clearance to begin seizing assets, Meehan said.

The confessed judgments in the settlement gives creditors the right to begin seizing -- without further court action -- more than $16 million in assets belonging to Trainor; members of his family; New England Diagnostics Ltd., a company he controls; and Pickerel Cove Trust, a family trust.

Family members also liable, according to court records, include Trainor's wife, Geraldine Trainor; his son Daniel P. Trainor of Florida; and three daughters.

The daughters are Karen Losordo of New Hampshire, who is alleged by creditors to have funneled Novatek money to her father and other family members; Diane Trainor, a Miami lawyer; and Geraldine Couture, a Hillsboro Beach, Fla., socialite.

Celentano negotiated and fulfilled a separate settlement with the creditors group this year.

Jay Shulman, a Baltimore lawyer representing the Novatek estate in the bankruptcy case, said he wants the seizure of assets to be pursued aggressively. "The next key step is vigorous enforcement against the Trainors for the default," said Shulman, of Gordon, Feinblatt, Rothman, Hoffberger & Hollander.

He also supports the creditors' fraud lawsuit against Universal Healthwatch Inc. of Columbia, a firm started and controlled by Trainor and Celentano. On Friday, Judge Schneider set a July trial date for that case after settlement negotiations with Wood Gundy broke down.

Universal claimed to be the developer and supplier of the test kits that Novatek said it had sales contracts for in Latin America. According to court records, Universal received $1.3 million from Novatek; however, it never delivered any medical kits or other goods and had no manufacturing capacity to make the kits.

The creditors argue in their suit the money was funneled out of Novatek as part of the Trainor scheme.

Ira Wolpert, a Bethesda lawyer representing Universal, said company executives recently showed him records proving that $800,000 was returned to Novatek. He said he plans to show those records to Meehan, Shulman and the court in an effort to settle the case.

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