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InterNet Bankruptcy Library - News for July 7, 1997







Bankruptcy News For July 7, 1997




        
  1. The Law Firms of Abbey, Gardy &
            Squitieri, LLP and Harold B. Obstfeld, P.C. Announce
            Notice of Pendency of Class Action

  2.     
  3. Former Chief Financial Officer of
            Cambridge Biotech Corporation Pled Guilty to Securities
            Fraud, U.S. Attorney Reports

  4.     
  5. GE Capital Services Provides $1
            Billion Debtor-in-Possession Facility For Montgomery Ward
            

  6.     
  7. Montgomery Ward Files Chapter 11;
            Receives Commitment for $1 Billion in DIP Financing

  8.     
  9. Bankruptcy Petition Against STS
            Dismissed






The Law Firms of Abbey, Gardy & Squitieri,
LLP and Harold B. Obstfeld, P.C. Announce Notice of Pendency of
Class Action



NEW YORK, NY - July 7, 1997 - The following statement was
issued today by the law firms of Abbey, Gardy & Squitieri,
LLP and Harold B. Obstfeld, P.C.:



YOU ARE HEREBY NOTIFIED that a Class Action has been commenced
in the United States District Court for the District of New
Jersey on behalf of all purchasers of Amre,
Inc.
common stock between April 29, 1996 and January 16,
1997, inclusive.



The Complaint charges certain of Amre's former officers and
directors with violations of federal securities laws, together
with HFS, Inc. Among other things, plaintiffs claim that HFS
controlled Amre's management and operations, and, together with
various Amre directors and officers affiliated with HFS,
misrepresented and concealed material adverse facts concerning
Amre's ability to market home improvement products under the
"Century 21" brand name, licensed to Amre from HFS. On
January 17, 1997, Amre announced that it ceased operations, and
subsequently consented to an involuntary bankruptcy petition
initiated by its creditors. Prior to Amre's termination of
operations, Amre insiders engaged in a massive sell off of their
holdings in the company's common stock.



Plaintiff seeks to recover damages on behalf of himself and
all other purchasers of Amre common stock during the class
period, excluding the defendants and their affiliates. Plaintiffs
are represented by Abbey, Gardy & Squitieri, LLP, and Harold
B. Obstfeld, P.C., law firms with extensive experience in
prosecuting class actions, and significant expertise in actions
involving corporate fraud.



If you are a member of the class described above, you may, not
later than 60 days from May 14, 1997, move the court to serve as
lead plaintiff of the class, if you so choose. In order to serve
as lead plaintiff, however, you must meet certain legal
requirements. If you wish to discuss this action or have any
questions concerning this notice or your rights or interests,
please contact Lee Squitieri or James S. Notis of Abbey, Gardy
& Squitieri, LLP at 800-889-3701 or 212-889-3700, or via the
firm's website at http://www.a-g-s.comor Harold B.
Obstfeld at 888-896- 0347 or 212-391-4150.



SOURCE Abbey, Gardy, Squitieri, LLP /CONTACT: Lee Squitieri or
James S. Notis of Abbey, Gardy & Squitieri, LLP,
800-889-3701, 212-889-3700 or http://www.a-g-s.com;or
Harold B. Obstfeld, 888-896-0347 or 212-391-4150/






Former Chief Financial Officer of Cambridge
Biotech Corporation Pled Guilty to Securities Fraud, U.S.
Attorney Reports



BOSTON, MA - July 7, 199 - A former chief financial officer of
Cambridge Biotech Corporation
("CBC") pled guilty today to committing securities
fraud relating to his role in a scheme to falsely inflate the
revenues of the company.



First Assistant United States Attorney Mark W. Pearlstein and
Barry W. Mawn, Special Agent in Charge, Federal Bureau of
Investigation, announced today that PETER P. HARTMAN, of Swanee,
Georgia, pled guilty before United States District Court Judge
Nathaniel M. Gorton to one count of securities fraud for his role
in a scheme to grossly exaggerate the sales revenue figures
contained in CBC's public filings and press releases.



Cambridge Biotech Corporation, which after emerging from
bankruptcy changed its name to Aguila Biopharmaceuticals, Inc.,
is a Worcester, Massachusetts, based company that is in the
business of developing, manufacturing and selling diagnostic and
therapeutic products for infectious diseases.



First Assistant Pearlstein stated, "Today's guilty plea
represent the third time in the past 18 months that a publicly
traded Massachusetts company has been implicated in a revenue
recognition' scheme. For all of their perceived complexity, such
schemes are nothing more than an attempt to rip off the investing
public by misleading them about a company's financial
performance."



At the plea hearing, Assistant U.S. Attorney Jonathan L.
Kotlier told the court that if the case had gone to trial the
evidence would have shown that HARTMAN and others at CBC
conducted a scheme to overstate the company's revenue by
improperly recognizing revenue from sales that were not, in fact,
legitimate sales. Pursuant to auditing rules, and the Financial
Accounting Standards Board, and the rules of the Securities and
Exchange Commission ("SEC"), the company was not
allowed to recognize the revenue from a sale until it had a firm,
unconditional contract with the customer and had shipped the
goods to the customer.



However, the company routinely included in its revenue figures
sales in which the customer had not agreed to buy the product. By
including such revenue in its publicly filed financial
statements, the company made it appear that its financial
performance was better than it actually was. As a publicly traded
company, CBC was required to file year-end and quarterly reports
with the SEC. The reports filed by CBC with the SEC, including
the Form S-3 Registration Statement for a Public Offering of
Shares in October, 1991 and subsequent quarterly reports,
contained false information relating to the company's revenues.



As stated at the hearing, HARTMAN, as the Chief Financial
Officer of CBC, was responsible for accurately recording and
compiling the financial information of the company. HARTMAN
participated in the efforts to include revenue from sales that he
knew had not been finalized. HARTMAN also participated in the
company's efforts to make these bogus sales look legitimate so
that they would not be noticed by the company's auditors. Many of
the bogus transactions were effected through CBC's Irish
subsidiary, Cambridge Biotech Limited ("CBL") located
in Galway, Ireland.



For example, HARTMAN caused an Irish company to order product
with the understanding that it would not have to pay for it.
HARTMAN caused CBC to fraudulently recognize $612,000 as revenue
from this transaction for the quarter ending December 31, 1992
even though he knew it was not a real sale. Shortly thereafter,
when the company's auditors sought to obtain a confirmation of
the "sale," HARTMAN arranged to pay $42,000 to the
principals of the Irish company in order to induce them to sign a
confirmation that the sale was real.



The Information to which HARTMAN pled guilty alleges a series
of circular transactions with international companies which were
designed to make a sale look real when in fact, CBC was paying
itself for the product. For example, for the quarter ended
December 31, 1991, CBC caused a broker from England to submit a
purchase order for product in the amount of $600,000. HARTMAN
booked the sale. In early 1992, in order to resolve this
transaction and to remove the $600,000 receivable from CBL's
books, CBL purchased a unique hepatitis- infected baboon liver
worth $48,640 at the inflated price of $737,349 from another
company that was related to the English broker (referred to in
the Information as Company C), and $600,000 of these funds were
returned to CBL in "payment" for the original
transaction. In short, CBC caused Company C to purchase the liver
from a supplier at the quoted price of $48,640, and then
"sold" it to CBL for the inflated price, as follows:
Company C purchased the liver from the supplier for $48,640, CBL
paid Company C $737,349 for the liver, and the English broker,
with money received from Company C, paid CBL the $600,000 due for
the December 31, 1991 "sale."



Pearlstein stated, "By improperly bolstering its
revenues, HARTMAN led the public to believe CBC was doing better
financially that it actually was. Unsuspecting investors
purchased shares of CBC based on information HARTMAN knew to be
false and which inflated the price of CBC's stock. The proper
functioning of the securities marketplace demands honest and
complete disclosure of financial information. Anyone who does not
deal honestly in this arena will be aggressively prosecuted by
this office."



Pearlstein further stated that he wished to thank the SEC for
its cooperation in the investigation. "The SEC has provided
invaluable assistance in this case. This case is just another
example of the strong working relationship between the SEC, the
FBI and the U.S. Attorney's Office."



HARTMAN faces up to five years imprisonment and a fine of
$250,000. Judge Gorton set sentencing for October 7, 1997.



The case was investigated by the Federal Bureau of
Investigation and is being prosecuted by Assistant U.S. Attorney
Jonathan L. Kotlier, Chief of the Economic Crimes Unit of the
U.S. Attorney's Office.



SOURCE U.S. Attorney's Office/CONTACT: Joy Fallon or Amy
Rindskopf of U.S. Attorney's Office, 617-223-9445/






GE Capital Services Provides $1 Billion Debtor-in-Possession
Facility For Montgomery Ward



STAMFORD, Conn., July 7, 1997 - GE Capital Services announced
a $1 billion Debtor-In-Possession (DIP) facility for href="chap11.montgomeryward.html">Montgomery Ward, which will
help assure Ward's stores are fully stocked for the important
holiday selling season.



In so doing, GE Capital Services expressed confidence in the
Chicago-based retailer, its newly formulated business strategy
and the Company's management team, led by Chairman Roger Goddu.



GE Capital Services Executive Vice President Ed Stewart said,
"We are convinced that Montgomery Ward's filing under
Chapter 11 of the Bankruptcy Code is the best way for the Company
to conclude a quick and effective restructuring."



GE Capital executives said they believed the Chapter 11 filing
will give Wards time to execute the business plan it recently
presented to employees, vendors and lenders.



"We believe Wards is a viable organization, one with new
management, new organization and a carefully crafted plan for
recovery," Stewart said.



With respect to the proposed sale of the Signature Group, the
direct marketing subsidiary of Montgomery Ward, Stewart said,
"We continue to work toward a definitive agreement with HFS,
Inc., for the sale of the Signature Group. It is important that
the company move quickly to a plan of reorganization to
effectuate the transaction."



In the second quarter, GE Capital Services wrote off its
investment in the common stock of Montgomery Ward. Despite this
write off, GE Capital expects to announce strong double digit
earnings growth for the quarter.



SOURCE GE Capital Services /CONTACT: John Oliver of GE Capital
Services, 203-357-4346, or home, 203-270-0383, or mobile,
203-962-6984/






Montgomery Ward Files Chapter 11;
Receives Commitment for $1 Billion in DIP Financing



CHICAGO, IL - July 7, 1997 - href="chap11.montgomeryward.html">Montgomery Ward & Co.,
Incorporated announced today that it has filed for reorganization
under Chapter 11 of the U.S. Bankruptcy Code. After a long period
of negotiation, most of its lenders agreed with the restructuring
plan, but a small group remained intransigent and blocked an
out-of- court settlement. By filing this petition, Montgomery
Ward will be given an opportunity to reorganize and begin
implementing its strategies while it works to restructure its
indebtedness.



The Signature Group is not included in this bankruptcy filing.
The company is close to a definitive agreement with HFS, Inc. for
the sale of the Signature Group; however, that transaction is
conditional upon the prompt recapitalization of Montgomery Ward.
"It is important that the Company move quickly to a plan of
reorganization to effectuate the transaction," said Roger
Goddu, chairman and chief executive officer of Montgomery Ward.



Additionally, Montgomery Ward announced that it has received a
commitment from General Electric Capital Corporation for $1
billion in Debtor-In- Possession (DIP) financing.



"We have a realistic strategic business plan that will
return Montgomery Ward to profitability," said Goddu.
"Although a Chapter 11 bankruptcy filing was not our desired
course of action, we believe that with the cooperation of our
vendors and our associates, it will allow us to concentrate on
implementing our merchandising strategy and emerge as a healthier
and more contemporary retailer."



Goddu added, "Our customers and our associates will not
be adversely impacted by this filing. The $1 billion DIP
financing will provide us with ready funds to continue to operate
our business. Our focus will be to move aggressively to recapture
our customers by offering them affordable fashion and reliable
services in all of our stores."



Montgomery Ward & Co. Incorporated, the largest privately
held retailer in the United States, operates a chain of 400
value-driven specialty stores in 43 states.



SOURCE Montgomery Ward & Co., Incorporated /CONTACT: Judy
L. Gustafson, Director-Corporate Communications/Training and
Development of Montgomery Ward, 312-467-2025 or fax, 312-467-
3975/






Bankruptcy Petition Against STS Dismissed



KNOXVILLE, Tenn.--July 7, 1997--A federal bankruptcy judge in
Knoxville today dismissed the bankruptcy petition filed recently
against Strategic Telecom Systems Inc. that attempted to force
the network distribution firm into involuntary bankruptcy.



"This action apparently was the result of an unfortunate
misunderstanding concerning three claims. Our records indicated
that two of the claims had already been paid, but apparently the
payments had not yet been received by the individuals. Our
records indicate that the third individual had not even submitted
a claim. The situation has now been resolved and we appreciate
the rapid dismissal of this case by the court," said STS
President A.R. "Rick" Catinella.



The total amount of the claims involved in the dispute was
less than $2,000.



Federal Bankruptcy Court Judge Richard Stair dismissed the
petition upon a motion filed by STS, which noted that the court's
jurisdiction did not cover claims of such a small size.



Catinella said STS, headquartered in Knoxville, Tenn., is not
bankrupt and is continuing to grow both its product line and
distributor base across the nation.



Strategic Telecom Systems Inc. is a network marketing company
specializing in telecommunications and other products, including
prepaid cellular service, home theater systems, Echostar digital
television satellite systems, paging, one-plus residential long
distance service, STS Travel and the Lifefax emergency medical
response system.



CONTACT: Strategic Telecom Systems, Knoxville Ken Renner,
615/783-1800 STS Corporate Spokesman