Coleman case trustee stays the course on $10 million in claims

As criminal trial ends, bankruptcy court effort nears start of fourth year

April 18, 2002|By Bill Atkinson | Bill Atkinson,SUN STAFF

Despite the guilty plea of Monica L. Coleman, the Baltimore stockbroker who ran a posh financial club downtown that collapsed three years ago, the story is far from over.

The case has been waged on two fronts: one in criminal court and the other in U.S. Bankruptcy Court. While the criminal case is winding up - Coleman will be sentenced in September - the bankruptcy case is very much alive.

The trustee overseeing the bankruptcy of Coleman and her firm, Coleman Craten LLC, is working to recover money for investors and creditors, and it could take an indefinite time before the job is finished, attorneys involved in the case said yesterday. Claims in the case total about $10 million.

"It goes on until the trustee is convinced that all assets that can be found have been found and have been converted to cash for distribution to creditors," said Martin T. Fletcher, a bankruptcy attorney at Whiteford, Taylor & Preston LLP, who is legal counsel to Lori Simpson, the trustee in the case. "It will go on at least until the trustee gets answers to her questions as to where the money went," Fletcher said.

In a plea bargain, Coleman, 45, pleaded guilty to five counts of securities fraud and one count of misappropriation by a fiduciary Tuesday in Baltimore Circuit Court. The Maryland attorney general's office intends to recommend that Coleman serve three years in prison.

Simpson, who has been working on the case since she was appointed its trustee in May 1999, is targeting individuals and companies that were paid about 90 days before Coleman and her company filed for bankruptcy. A provision under the bankruptcy code allows trustees to recover funds that were paid out and distribute them evenly to all creditors.

Simpson is seeking to recover more than $1 million from Coleman's family members, including her parents, Kenneth and Eleanor Harris; her brother, Kenneth Harris Jr.; and her husband, Richard Coleman, Fletcher said.

She also has filed lawsuits against Allfirst Bank and Charles Schwab Corp. to recover $600,000. In addition, she is looking to recover about $500,000 from the Baltimore Development Corp., which was Coleman Craten's landlord, Fletcher said.

Fletcher estimates that Simpson and his firm have recovered about $4 million and have distributed between $2 million and $3 million to Coleman Craten clients. Another $1 million has gone to secured creditors.

Joel Sher, a trustee and bankruptcy attorney at Shapiro Sher & Guinot in Baltimore, said Simpson has done well for the creditors and investors.

"Lori had to litigate for everything she got," he said.

Four months ago, about 20 investors who lost an estimated $4 million in Coleman Craten, recovered half of their money when Legg Mason Wood Walker Inc., Coleman's former employer, agreed to pay $2.1 million under a settlement agreement.

Simpson and the Maryland securities commissioner claimed that the firm failed to adequately supervise Coleman while she worked there. Legg Mason disputed the charge, but said it agreed to the settlement to put the matter to rest.

Simpson recovered about $1.3 million from the sale of three houses in Pasadena owned by the Colemans and thousands of dollars from the sale of Coleman Craten's computers, televisions and a huge U-shaped mahogany bar with a long brass foot rail. She has also recovered about $450,000 from various vendors to the firm, she said.

"We just try to do what we are supposed to do," Simpson said. "I am pleased so far. I hope we get some more."

Simpson was criticized by Coleman's attorney, Robert H. Waldman, who claimed that she violated his client's Fourth Amendment rights, which protect individuals against unreasonable searches and seizures.

He declined to comment further. "I don't want to add fuel to the fire," Waldman said.

In May 1999, shortly after Coleman and the firm filed for bankruptcy, Simpson walked through the Colemans' house and changed the locks. Inside the house there were "bank records strewn around," she testified in court.

Simpson testified that she saw personal and company documents on chairs and tables and under beds. "The premises were - to put it in the vernacular - trashed," she said. "This gave me great cause for concern that assets might be moved."

She also told the court that she discovered an unidentified account register with entries totaling $500,000 and a deposit slip from early May for $400,000.

Simpson said in an interview yesterday that she was "just doing my job," and that she will press on and look for more money.

"I spend a little bit of time [on the case] every day," Simpson said. "You just need to do what you need to do."

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