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Fortgangs fight back in Fabrikant case

By Michelle Graff
June 27, 2008

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New York—Members of the Fortgang family, the former owners of now-bankrupt diamond company M. Fabrikant and Sons, have won the right to a hearing and were granted access to a monthly "personal allowance" a week after a judge ordered all of their assets seized, court papers said.

The motion, filed in U.S. Bankruptcy Court for the Southern District of New York, modified the court's June 18 order in which U.S. Bankruptcy Court Judge Stuart Bernstein authorized U.S. marshals to take all the necessary steps to seize the assets of members of the Fortgang family, including forcing their way into the family's apartments on Fifth and Park avenues in Manhattan as necessary.

The June 18 order was issued in response to a complaint filed by the "shared assets trust" of Fabrikant lenders and creditors, who are seeking to recoup assets.

Lenders and creditors claim members of the Fortgang family diverted funds to affiliate companies before filing for Chapter 11 bankruptcy protection, according to court papers.

At the time the June 18 order was entered, however, Fortgang attorney Hunter Carter of Arent Fox LLP sent a letter to Bernstein requesting a hearing on the matter, stating that his clients "stand to be irreparably damaged by some of the provisions" included in the order.

Court documents filed on June 24 show that Fox apparently won his request for hearings.

In the meantime, Matthew, Charles, Susan, Marjorie and Theresa Fortgang won the right to a monthly personal allowance of funds from their respective banks, court documents show.

The release schedule is as follows: Charles, Marjorie and Susan Fortgang, $25,000 per month each; Matthew Fortgang, $40,000 per month; and Theresa Fortgang, $10,000 per month, court papers state.

The family members are also expected to give depositions in the case, and their lawyers are cooperating with requests for discovery regarding the alleged diversion of funds.
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