3 Bibelot creditors, Weeses settle

$13 million deal with banks appears to be final chapter in rise, fall of book chain

March 01, 2003|By Lorraine Mirabella | Lorraine Mirabella,SUN STAFF

Brian D. and Elizabeth G. Weese, former owners of the now-defunct, Baltimore-area Bibelot bookstore chain, have reached a $13 million settlement with creditors who had accused the couple of fraudulently transferring nearly $20 million to an offshore trust fund.

The settlement puts an end to several lawsuits against the couple in which creditors were seeking to recover at least $17.5 million owed after the once-popular bookseller filed for bankruptcy in March 2001.

Bank of America NA, the Weeses' largest creditor, gets $10 million of its more than $15 million claim, the trustee overseeing couple's personal bankruptcy case said yesterday. The settlement also pays Allfirst Bank $1.45 million of its $1.7 million claim.

Another creditor, Community Banks, had reached a separate settlement in which it gets $875,000, said trustee Irving E. Walker, an attorney with Saul, Ewing LLP in Baltimore. Another $657,000 will go toward Saul, Ewing's fees and commission.

"The creditors' claims have now been fully resolved in this case," Walker said yesterday.

He said the money will be paid out of the Alex Grass Trust, controlled by Grass, Elizabeth Weese's father and the founder of Rite Aid Corp.

Attorneys for the Weeses, Bank of America and Allfirst could not be reached yesterday.

In light of the settlement - which Walker said U.S. Bankruptcy Judge James F. Schneider approved Feb. 21 - Walker has asked the bankruptcy court to dismiss the Weeses' personal bankruptcy case.

A trial in that case set for June had been scheduled after Walker filed a lawsuit in June asking the court to order millions of dollars of the Weeses' assets returned to the United States.

The settlement effectively ends other creditor lawsuits in Baltimore County and in the Cook Islands in the South Pacific.

Those suits claimed that the Weeses had set up an offshore account - the Book Worm II Trust - intending to defraud creditors before the bookstore chain filed for bankruptcy in March 2001 and went out of business.

Court records show that Elizabeth Weese set up the trust in 2000 under Cook Islands laws, then over a period of three months transferred assets worth more than $19.5 million.

Walker said he would expect the Baltimore County case to be dismissed and said that Bank of America and Allfirst are no longer involved in the Cook Islands case.

The $13 million settlement amount "exceeds what we believe was left in the Cook Islands trust," Walker said.

An earlier, but similar, settlement between the couple and their creditors had unraveled in early January after Allfirst objected to the deal.

Allfirst had argued in court documents that the settlement violated bankruptcy rules because it allowed unsecured creditors to receive distributions before the debtors worked out a plan of reorganization. Under that settlement, Allfirst would have received $1.2 million.

After that deal fell apart, negotiations had continued and ultimately "Allfirst received sufficient money ... that if found acceptable," Walker said.

The settlement is the final chapter in the rise and fall of the local chain that Weese, co-owner with his wife, had tried to build into a community bookstore.

In five years, Bibelot had become a Baltimore fixture, with stores in Canton, Cross Keys, Pikesville and Timonium. The operation was known for its vast selection of books and music, a cozy atmosphere and Donna's coffee bar restaurants.

Retail experts and former employees blame the chain's demise on its founders' attempts to expand too ambitiously.

When Bibelot began closing its stores nearly two years ago, the chain had 180 employees and more than $20 million in debt to banks, publishers and distributors.

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