COURT TOSSES EX-WORKERS’ GRIPES, GIVES NOD TO LESLIE FAY CH. 11 PLAN
Byline: Vicki M. Young
NEW YORK — Bankruptcy Judge Tina L. Brozman has thrown out the objections by six former employees to The Leslie Fay Cos.’ Chapter 11 plan of reorganization and has approved the plan.
Judge Brozman rejected claims by the former employees that current management is corrupt and the plan defective because it “perpetuates the influence and conflicts of interest on the part of John J. Pomerantz [Leslie Fay chairman and chief executive officer] and the former members of the management of Leslie Fay.”
In a 59-page decision made available Wednesday, Judge Brozman determined that the sole witness in support of the objections failed to explain contradictory testimony, avoided answering questions by providing irrelevant speeches and appeared to “invent things” as his testimony continued.
The decision paves the way for official confirmation of The Leslie Fay Cos. reorganization plan and exit after four years of Chapter 11 proceedings. Hearing on confirmation is set for Monday.
The sole witness testifying in support of the objections was Raymond J. Terwilliger, the former human resources vice president for Leslie Fay who was terminated in August 1992. His main contention was that Pomerantz and two others, former senior vice president and general counsel Herman Gordon and former president and chief operating officer Alan Golub, had actual knowledge and knew the extent that Paul Polishan, former chief financial officer, was allegedly “cooking the books” of Leslie Fay.
Brozman found, however, that Terwilliger offered mostly “incredible and contradictory accounts of circumstances during which Pomerantz or other members of senior management were allegedly notified.”
Leslie Fay filed for bankruptcy in April 1993 following disclosure on Feb. 1 of massive accounting irregularities.
On Oct. 29, 1996, Polishan was indicted on several counts of securities, bank and wire fraud. Donald Kenia, also a former member of the financial department, pleaded guilty to federal charges of false reporting to the Securities and Exchange Commission. Polishan, who has denied the charges, is yet to be tried, and Kenia, who is cooperating with prosecutors, has not yet been sentenced.
Judge Brozman also noted testimony of Joan Ruby, Leslie Fay’s general counsel, stating that she is “not aware of any pending criminal actions against members of current management or any instance where any member of current management has invoked his or her Fifth Amendment privilege against self-incrimination.”
An issue was also raised regarding stock options granted to management on the effective date of the reorganization plan, set for sometime in May. It would split the company into two entities — reorganized Leslie Fay and New Sassco, both of which will be creditor owned. Brozman determined that there was nothing inherently unfair or inequitable about the stock option provisions.