Platt Executives Sued by Creditors
The former executives of Platt Music Co. have been sued for $16.5 million for allegedly paying themselves huge bonuses and transferring assets out of the company before turning it over for liquidation.
The suits were filed on behalf of Platt’s creditors, who were owed a total of about $75 million, by the Credit Managers Assn. of Southern California, the nonprofit organization that was responsible for liquidating the Los Angeles company and distributing the proceeds to the creditors. According to the credit association, the liquidation raised less than $15 million and some unsecured creditors received as little as 10% of what they were owed.
Platt, which once sold home appliances and electronics in several department stores, went out of business in November, the victim of a costly national expansion drive and increased competition from discount consumer electronics emporiums.
When the company’s officials realized the depths of their problems, they turned the privately held company’s assets over to the credit association and authorized a liquidation rather than seek a court-supervised bankruptcy, a more lengthy and potentially most costly alternative.
Named in Suit
However, according to attorneys for the association, Platt’s owners and top executives allegedly gave themselves bonuses and other payments totaling $1.6 million and transferred more than $50,000 worth of equipment to a new company in the months immediately preceding the asset assignment to the credit association. The suits seek repayment of the money and $15 million in punitive damages.
“They knew the company was in trouble when they did this,” said Richard P. Towne, of Dennis, Juarez, Shafer & Young, a Los Angeles law firm.
Named in the suit were former Platt Chairman Michael Glazer, former President Thomas Bagan, former Executive Vice President Francis Arnone and former Chief Financial Officer William Sliney.
Sliney, a spokesman for the executives, said the allegations “are without merit” and declined to comment further.
Further, the legal documents allege that the same Platt executives transferred valuable assets out of the company before the liquidation when they formed a new company to handle the service contracts Platt sold with many of its appliances and electronics products.
The new company, Phoenix Service Corp., took the obligation to service the contracts and executives said at the time that Platt creditors supported the move because the contracts represented a potential liability. However, according to the court documents, Phoenix also received office furniture, computer equipment and other supplies worth in excess of $50,000 without adequate compensation to Platt.
