A&B trustee to be named

U.S. bankruptcy judge acts on request involving check-cashing firm linked to check kiting

August 24, 2006|By Laura Smitherman | Laura Smitherman,Sun reporter

U.S. Bankruptcy Judge Nancy Alquist ordered yesterday that an independent trustee be appointed to take control of A&B Check Cashing after federal officials said they found evidence that appears to support allegations that the company's owners were involved in a check-kiting scheme that cost local financial institutions millions of dollars.

The U.S. Trustee's Office, an agency of the Justice Department that monitors parties in bankruptcy cases, had asked for a trustee to oversee the bankruptcy of A&B and its parent Colleen Inc. The company closed its 20 locations and filed for bankruptcy protection in June, listing as creditors the two banks and money-order business that claim to be victims of the kiting scheme.

Fallout from the scheme has spread beyond Baltimore's financial community, as several local banks have stopped doing business with all check cashers, saying they require too much monitoring. Check cashers have come under fire for charging high fees but are often the only option for poor residents who don't have bank accounts.

In court papers, the trustee's office said bank statements and checks from February through June reveal that A&B owner Brian Satisky and his brother and co-owner, Alec Satisky, were signing company checks written to the company from one account and deposited into another account.

The checks totaled millions of dollars each day.

"Fraud, incompetence, gross mismanagement; those are serious allegations," Sandra A. Manocchio, an attorney with the trustee's office, said at a hearing yesterday.

Brian Satisky, who did not attend the hearing, asserted his Fifth Amendment right not to incriminate himself during earlier court proceedings. Alec Satisky committed suicide at the company's headquarters before the stores were closed. He died of a self-inflicted gunshot wound, according to Baltimore police and the state's medical examiner. Brian Satisky could not be reached yesterday.

The FBI has confirmed it is investigating the check-kiting allegations.

Baltimore County Savings Bank and Carrollton Bank of Baltimore say they were victimized in the kiting scheme and together have recorded after-tax losses of about $8 million, or $12 million before taxes.

Global Express Money Orders Inc. of Silver Spring says it lost nearly $2 million. In total, the three entities are seeking to recover about $14 million.

Attorneys for the creditors said a trustee is needed to pursue any claims against the personal assets of Brian Satisky and the estate of Alec Satisky, which could entail questioning Alec's widow, Deborah, and other family members in depositions. Creditors already are scrambling to recover what's owed to them through the liquidation of A&B's business assets. An auction of equipment and leases is expected to take place in mid-September.

"Time is wasting, and the trail is getting cold," said James T. Heidelbach, an attorney for Baltimore County Savings.

"We're talking a lot of money here; $14 million evaporated overnight," said Robert J. Parsons II, Carrollton's attorney. "That money has got to be somewhere."

In general, check kiting involves writing a bad check on one account, depositing it into another account, and then writing a second check to cover the first.

Heidelbach and Parsons argued in court papers that Brian Satisky has made little or no effort to recover A&B's assets and that as long as A&B remains in his control, the company has no incentive to look at claims against his property or his brother's estate.

A&B's bankruptcy attorney Marc Kivitz and Manocchio agreed an independent trustee should take over the case. But Kivitz said he was not conceding that A&B had committed fraud.

Kivitz also asked the judge to postpone the appointment of a trustee until after the auction. He argued that such a delay would reduce confusion and minimize a trustee's fees, as much as $50,000, that would be taken from the amount paid to creditors.

The judge declined the request and ordered A&B and its attorneys to turn over any assets, books and records to the trustee. Local attorney Zvi Guttman is expected to serve as the trustee.

Kivitz said he has received three bids to date for A&B's locations, including one bid of $350,000 for all of them. Other business assets are $520,000 in cash and approximately $500,000 that could be recovered from third parties because of bad checks they cashed at A&B stores.

laura.smitherman@baltsun.com

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