A Baltimore County judge has put off ruling on whether the wealthy owners of the bankrupt Bibelot bookseller can use or transfer assets they allegedly placed in an offshore trust.
During a hearing yesterday, Bibelot creditor Bank of America sought an injunction to prevent store owners Brian D. and Elizabeth G. Weese from using the more than $25 million in assets the bank claims were moved offshore to defraud creditors.
Baltimore-based Bibelot filed for Chapter 11 protection from creditors in March, with more than $20 million in debt - most of it owed to the bank, which in 1999 extended a $17 million line of credit to Bloomsbury Group Inc., the corporation that ran Bibelot.
Circuit Judge Christian M. Kahl asked attorneys for both sides to submit further arguments by July 16 on whether the injunction should be granted. He said that would give him time to sift through nearly 100 exhibits presented yesterday.
David L. Moore, a vice president with Bank of America, testified that the bank approved the $17 million loan based on financial statements showing Elizabeth Weese's net worth at $41.9 million. Subsequent statements showed a net worth of $36.9 million Nov. 1, 1999, and of $36.8 million March 31, 2000, Moore said.
The Weeses still owe $14.4 million to the bank, Moore said. The bank won a judgment in Baltimore City Circuit Court in December for the $17 million.
Between March 2000 and March 2001, the bank collected $3.3 million through the sale of some Bibelot assets. The bank also sold about $1.9 million of Elizabeth Weese's Rite Aid stock on June 30, 2000. A holding in Merrill Lynch & Co. stock, said to be worth about $1 million, was acquired by the bank but has yet to be sold.
The bank claims that the Weeses fraudulently placed $25 million, plus their house, furnishings and artwork valued at $300,000, into their Book Worm Too Trust in the Cook Islands.
Sharon K. Moore, director of financial consulting for FTI Consulting in Washington, who valued the Weeses' assets for the bank, testified that the offshore transfers made the Weeses insolvent, lacking sufficient assets outside of the trust to pay their debt. Their remaining assets - including custodial accounts, Bloomsbury Group stock, a Merrill Lynch trust and minority interests in partnerships - are of little or no value to creditors, she said.
Attorneys for the Weeses painted a picture of a business trying to pay off its debt by selling the four-store chain. Borders Group and Crown Books initially expressed serious interest but never made a formal offer. Brian Weese testified that he stopped taking his $50,000 salary last fall and invested more than $1 million in the business. Weese said he has not received any money from Book Worm Too Trust since November. He said he opened a bank account in Delaware - which is not subject to attachment by creditors - because "we needed a means to pay our bills."
When asked yesterday by Bank of America attorneys to take an interim step to limit the Weeses' access to the offshore account, Kahl declined, saying he would first need both sides to agree on a way to do that.
"It's in a Swiss bank account," the judge said. "I can't do anything about the Swiss bank. All I [could] do is order the defendants to make no move to disburse the funds."
Bibelot has closed its Canton store and plans to close the others, in Timonium, Pikesville and Cross Keys, by the end of the month.
Sun staff writer Dennis O'Brien contributed to this article.