Fortgangs ask for release of assets

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Fortgangs ask for release of assets

By Michelle Graff

August 19, 2008

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New York—The Fortgang family, former owners of now-bankrupt diamond supply company M. Fabrikant and Sons, is asking the court to release the freeze on more than $200 million of their combined assets, claiming they have been falsely accused of siphoning money to avoid paying their debtors.

The request, made in a 172-page memo, backed up by sworn statements from the Fortgang family, was filed Aug. 15 by the Fortgangs' attorneys in the U.S. Bankruptcy Court of the Southern District of New York in Manhattan.

The memo states that the court was "misled" into believing that an emergency situation required the immediate freezing of the family's assets and that there is "no threat of any irreparable harm justifying this surprise attack."

The memo asks the courts to release the asset freezes—known as the ex parte orders—as these orders have been "utterly staggering financially, emotionally and professionally" on the Fortgang family.

"The Fortgangs' reputations have been forever tarnished and only the immediate vacating of the ex parte orders will begin to remedy the damage that has been done," the memo states.

Hearings on the family's request are slated for late September.

The fireworks in the Fabrikant case began back in June, when a bankruptcy court judge authorized U.S. marshals to take all necessary steps to seize the Fortgangs' assets, including forcibly entering their apartments on Fifth and Park avenues in Manhattan.

The order was issued in response to a complaint filed by Fabrikant's lenders and creditors who were seeking $90 million in damages in the case because, they claim, members of the Fortgang family diverted funds to affiliate companies before filing for Chapter 11 bankruptcy protection.

The order also froze more than $200 million of the Fortgangs' individual assets.

Though the asset freeze remains intact, a judge later reversed the seizure orders, sparing the family from having U.S. marshals enter their property. The judge also granted Fortgang family members a monthly personal allowance of funds from their respective banks, court papers show.

Charles, Marjorie and Susan Fortgang were allotted $25,000 per month; Matthew Fortgang, $40,000 per month and Theresa Fortgang, $10,000 per month, court papers state.

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