Coleco Creditors Locked In Lawsuit
HARTFORD, Conn. (AP) _ Two New York businessmen have denied accusations that they cheated Coleco Industries Inc. out of millions of dollars.
Isaac Perlmutter and Bernard Marden are accused in documents filed in U.S. Bankruptcy Court in New York by a group of creditors involved in Coleco’s Chapter 11 case.
But Perlmutter and Marden said in court documents that all their dealings with Coleco have been ″in good faith″ and ″without fraudulent intent.″
The two men have asked Judge Prudence B. Abram to dismiss the lawsuit filed against them on Feb. 14. No trial date has been set.
Coleco, based in Avon, filed for protection from creditors in July, citing debts of $540.3 million.
Perlmutter and Marden are together owed about $80 million and represent one group, making them the toy company’s single largest creditor. They also are first in line to have their claims paid once the bankruptcy matter is settled.
The lawsuit was filed by a second group that includes bondholders, manufacturers and advertising agencies owed a total of $400 million.
The two businessmen become Coleco’s largest creditor when they bought the company’s bank debt from a group of U.S. and foreign banks. But it is their past dealings with Coleco that has drawn the wrath of the others.
The creditors charge that Perlmutter and Marden cheated and overcharged Coleco during the past two years through a complex scheme involving the sale of the company’ excess products in exchange for television advertising time.
Coleco often sold its excess toys to Beckman Group, a New York close-out company owned by Perlmutter and Marden.
The television credits were given through Admerex International, another company owned by the two men. It specializes in buying television commercials.
The lawsuit charges that during a two-year period, Perlmutter and Marden received $144 million of merchandise from Coleco and paid the company $73 million in cash and $76.4 million in advertising credits.
To use the credits, Coleco was required to pay 40 percent of the cost of a television commercial and use the credits for the other 60 percent. So, $50.6 million in cash was needed to use the $76.4 million in credits, the lawsuit claims.
The lawsuit charges that Perlmutter and Marden knew Coleco was having financial problems and did not have money available. Therefire, it claims, the two cheated Coleco out of $71 million by giving the company worthless advertising credits.
The lawsuit also accuses the two of overcharging Coleco $27 million for television commercials that the company did run in the past two years.
Coleco, which is not a defendant in the suit, said the charges are ″without merit.″