Downey S&L; Sues Helionetics for $154.8 Million
Downey Savings & Loan Assn. has filed a $154.8-million fraud and breach-of-contract suit against the Helionetics Inc. employee stock plan, former Helionetics Chairman Bernard Katz and the Bank of America.
The suit claims that Katz caused some of Helionetics’ assets to be transferred into one of the financially ailing company’s successful subsidiaries to shelter the assets from creditors and that Bank of America, trustee of the stock plan and Helionetics’ major lender, withheld information about the company’s financial problems to entice Downey to share liability for the bank’s loans to Helionetics.
The transfer of assets, the suit alleges, was engineered by Katz just before Santa Ana-based Helionetics filed for bankruptcy-law reorganization last year.
Downey, based in Costa Mesa, seeks in its suit to recover a $4.5-million loan to Helionetics, plus about $300,000 in accrued interest. The suit also seeks $150 million in punitive damages.
Downey also accuses Bank of America of breaking an intercreditor agreement by failing to help the S&L; enforce and collect its loan. Downey is seeking a portion of the collateral held by Bank of America as security for an existing line of credit to Helionetics.
Bank of America officials declined to comment on the suit.
Other defendants in the action, filed late Wednesday in Superior Court in Santa Ana, include Helionetics’ HLX Laser Inc. subsidiary.
In the suit, Downey alleges that Helionetics and Katz, its former principal shareholder and chairman, formed HLX Laser primarily to use it to shelter the assets of the company’s profitable laser division from creditors’ claims once the Chapter 11 filing was made.
The transfer of assets, the suit alleges, violated the loan agreements between Downey and the Helionetics Employees Stock Ownership Plan.
Katz denied the allegations Thursday in a telephone interview.
A Helionetics spokeswoman said company officials had not received a copy of the suit and were not prepared to comment.
