Bank sues Bibelot's owners, alleges assets shifted

Weeses guaranteed loan of $17 million, set up offshore trust

March 14, 2001|By Thomas Healy | Thomas Healy,SUN STAFF

With their business struggling and creditors bearing down on them, the owners of the Bibelot bookstores transferred more than $25 million in personal assets to an offshore trust account last summer to protect themselves from the fallout of the store's impending bankruptcy, according to allegations in a civil lawsuit filed in Baltimore County Circuit Court.

The plaintiff, Bank of America Corp., alleges that Brian and Elizabeth Weese created the trust account July 12, the same day the bank began arbitration proceedings to recover a $17 million loan to Bibelot.

The Weeses had personally guaranteed the loan, according to the lawsuit that was filed Feb. 21, and when it became apparent that Bibelot would not be able pay the debt, the bank had moved to collect the money directly from the Weeses.

But over the next several weeks, the bank alleges, the Weeses moved the majority of their assets, including cash and investments, into the offshore trust account. They also sold a house - valued at approximately $2.5 million - for $10 and sold $300,000 in art to their children, the suit says.

Bank of America wants to recover those assets to satisfy the $17 million debt, which a Baltimore City circuit judge in a related case has ordered the Weeses to pay. To do so, it must show that the Weeses were attempting to evade their debt to the bank and that they were broke at the time.

Attorneys for the bank were unavailable for comment yesterday. But Price Gielen, an attorney for the Weeses, disputed the allegations.

Although Gielen would not comment on whether the Weeses had indeed transferred the assets, he said that Bank of America would not be able to prove that his clients had done anything wrong.

"We're confident it will be demonstrated that everything the Weeses did was appropriate and legal," Gielen said in an interview.

The allegations by Bank of America are the latest development in the recent, surprising demise of Bibelot, the area's largest independent book dealer.

Opened by the Weeses in 1995, the business had appeared to be competing successfully with such national chains as Borders and Barnes & Noble. It offered the selection and amenities of those chains while maintaining the intimacy and ambience of an independent bookshop.

But on Friday, Bibelot filed for Chapter 11 bankruptcy protection and announced plans to close its four stores and lay off an estimated 100 employees. The news came as a shock to many customers and has been lamented in editorials and on radio talk shows.

In another development yesterday, a federal bankruptcy judge approved Bibelot's plan to hire an inventory liquidation specialist and to begin a going-out-of-business sale tomorrow. The sale will be managed by Schottenstein/Bernstein Capital Group and is expected to last as long as 90 days.

The judge delayed a decision on whether Bibelot will be allowed to honor gift certificates purchased before the bankruptcy filing. Bank of America had asked for additional time to consider the request, and the judge has scheduled a hearing for tomorrow.

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