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Creditors charge Colt with fraud in latest lawsuit.

Unsecured creditors in the Colt's Manufacturing bankruptcy case will be allowed to file a $22 million lawsuit alleging fraud and misrepresentation against parties involved in the 1990 sale of the Hartford, Conn., gunmaker, ruled the U.S. Bankruptcy Court on December 9, 1992. The suit, however, was not allowed to be filed until January 19 (one month after this magazine went to press), giving Colt's a chance to finalize its negotiations with its creditors and, perhaps, find a way to avoid that suit.

Company officials said that allowing the creditors committee to file a suit would only make reaching a consensus more difficult. "(Colt's) is trying to broker a solution among the parties. We'd like to allow the negotiating process to continue," said company spokesman Robert White.

The lead attorney for the creditors committee, John Nolan, said that Colt's owes more than 500 unsecured creditors, mostly local small businesses and suppliers, between $6 million and $7 million. Preliminary reports say the committee will ask for the return of more than $22 million paid by Colt's to other parties.

Of this potential $22 million sum, the lawsuit states that $10 million will be paid to settle Coltec's obligation to Colt's labor union, $7 million will be used to keep Coltec from returning to the firearms industry, and $5 million will go to pay the parties named in the suit.

The unsecured creditors are also attempting to bring fraud charges against Coltec Industries of New York (former owner of Colt's) and its affiliates, Anthony Autorino (former Colt's chairman) and his partner, London-based investment banker Herbert Oakes, and the Austrian bank which financed the whole deal, Creditanstalt-Bankverein. The committee alleges that the parties involved in the sale "schemed to misrepresent the value of a company they knew to be insolvent and undervalued from day one," according to a report in the Hartford Courant.

Autorino ridiculed the charges, saying, "This is obviously a ploy on the part of the attorneys to get anything they can for the unsecured creditors." The other named parties declined comment.

Noticeably not named in the suit were the United Auto Workers union, representing hourly workers, and the state pension fund, which invested $25 million in Colt's. The current Colt's management staff was also not named.
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Copyright 1993 Gale, Cengage Learning. All rights reserved.

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Title Annotation:Colt's Manufacturing Company Inc.
Publication:Shooting Industry
Date:Feb 1, 1993
Words:376
Previous Article:Winchester: rifles and shotguns.
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