CaroLinks investors file lawsuit: Seek injunction, receiver appointment

Wednesday, 24 October 2007

Page 2 of 2 On Nov. 16, 2006, Robert and George Kraus each executed separate forbearance agreements with Safe-Ports, whereby the Schemans acknowledged and agreed the loans were in default. In exchange for the forbearance, each Kraus was issued 156 units of Class B membership interest in Safe-Ports. The agreement also prohibited Safe-Ports’ ability to “incur any additional material indebtedness” without the Krauses’ written consent. The loans were ultimately repaid in early March 2007. The lawsuit charges that Duncan-Scheman and her husband subsequently violated the terms of the amended operating agreement, including, without limitation, incurring substantial, material indebtedness, without first obtaining the Krauses’ written consent. Specifically, the Krauses charge that Safe-Ports incurred $2 million in debt payable to Scheman pursuant to a note executed on May 7, 2007. Further, the lawsuit charges that Safe-Ports, through the conduct of its members, assigned, conveyed or transferred all or a substantial part of Safe-Ports assets to other entities without the proper assent of Safe-Ports members. Moreover, the suit states, “the defendants, or some of them, have ignored generally accepted accounting principles, co-opted corporate opportunities, failed or refused to remit state and federal payroll tax payments, and willfully, wantonly and maliciously concealed the true nature of Safe-Ports financial conditions from partners, lenders and investors.” The Krauses contend that they repeatedly requested information relating to CaroLinks’ finances, but those requests were brushed off by Duncan-Scheman and others, who cited conflicting travel and business schedules. When documents were finally produced, the Krauses maintain that the defendants produced only a portion of the books and records requested. The suit maintains that CaroLinks raised $4 million in investments and a similar amount in loans, most of which has been spent. By the time they got to see the books, the Krauses charge, only $44,000 in cash remained. At the same time, the court papers state Safe-Ports/CaroLinks apparently forfeited $1.7 million of nonrefundable deposits on land. It also appears to have booked a sale of $500,000 in stock (in addition to the $4 million cited above) with the offsetting entry being office rent. The Krauses charge that the assets of Safe-Ports/CaroLinks have been misappropriated and contend that without the appointment of a receiver, the company is in grave financial jeopardy. The Krauses also charge that Duncan-Scheman is planning to use the profits of the sale of Safe-Ports/CaroLinks’ Orangeburg land options to Jafza International for her own benefit, to make preferential payments to relatives or other corporate insiders and to employ a new business plan that has not been shared with the remaining members. << Start < Prev 1 2 Next > End >>