Everyone has their horror stories about what happens after a bank merger. One man who claims to have been wronged, Ramkrishna S. Tare, founder of WebSci Technologies (formerly DB Tech), is fighting back.
Tare has found other businesses that believe they were hurt by Fleet Bank’s takeover of Summit and has helped to instigate a government investigation. Tare, who owned his company’s building on Route 1 North in Monmouth Junction, claims that his business went from being a $15 million firm to being forced to file Chapter 11 bankruptcy, and that the firm should not have gone bankrupt.
"This happened at exactly the time Summit was sold to Fleet, and we were trapped in that transition. All our loan officers and brokers were terminated," says Tare, who claims the bank engaged in illegal "tying" of his loan to another bank account. "Fleet’s new management started taking positions that were not based on any facts."
Now that Fleet is a target for acquisition by Bank of America, the consequences of big banks swallowing smaller banks have special resonance. And any legal matters involving Fleet could become more crucial. At least one Congressman is actively pursuing an investigation of alleged illegal "tying" of loans to other bank business, and other federal agencies are reportedly doing their own investigations.
Tare says he is telling his story so that other victims of big banks like Fleet will be forewarned and perhaps seek redress. Among his many charges are that Fleet allegedly filed false proofs of claim in his business and personal bankruptcies, and that there was a significant breach of fiduciary duty, because the attorney appointed as trustee for his personal bankruptcy had a connection with Fleet. He hopes that photographs taken in Fleet’s storage facility will help him prove that Fleet intended to destroy the evidence of its alleged wrongdoing.
The son of a professor, Tare grew up in Goa, formerly a Portugese colony, and graduated from the Indian Institute of Technology. He came to this country in 1983 to earn a master’s degree in computer science at New Jersey Institute of Technology, then worked as a systems analyst for Bell Labs in Murray Hill. After being a consultant for two years he founded DB Tech in 1991 and changed the name to WebSci after the Internet came along.
At its peak, the company had 250 employees, including 160 employees in New Jersey at client sites, and four offices (including those in Rumania, India, and Virginia). In April, 2002, according to Tare, the bank cut off his credit line, and by July, 2002, the firm was bankrupt.
Until recently Tare’s was a lonely battle. Then he discovered that as many as 50 other companies claim Fleet’s takeover of Summit has adversely affected their businesses.
Isidor Farash of Farash & Robbins, a wristwatch wholesaler in South Hackensack, is suing Fleet Bank for the second time. Farash, who puts his trust in small banks, had chosen to do business with Citizen’s First, but it was bought in quick succession by NatWest and Fleet. Fleet ended up paying Farash a settlement of $42,000 for erroneously freezing his account. Next Farash set up his line of credit with Summit Bank. Again the bank was bought. This time, says Farash, Fleet reconfigured the terms of the contract he signed with Summit to deny him availability to more than $800,000.
"We had a credit rating that was hard to rival," says Farash of his 16-year-old company. "I could get $350,000 in open credit from a supplier in Europe based on our credit history and our reputation. They ruined my credit rating. They destroyed my relationships with my customers, and made it impossible to fulfill the contracts I had on hand. My company had 15 straight years of earnings, spotless credit, an excellent Dun & Bradstreet report, and profits every year. Now I have laid off three-fourths of my staff and am constantly trying to figure how to meet payroll."
Represented by Fred Biehl of Roseland-based Soriano Hinkle Matthews, Farash is suing Fleet, and Fleet is countersuing. But Farash says that the damage to Tare’s company was "an order of magnitude" greater than the damage to his own. "Tare had a bigger company with a wider profit margin and long term contracts," says Farash. "When you have a long term contract with AT&T that is pretty bankable. He was one of the early tech people who figured out how to make the best use of third world technicians."
Tare is reluctant to go on the record regarding his current litigation, and Farash — with more experience in these matters — is willing to provide an analysis: that Fleet "defaulted" Tare without warning. "Tare had no previous experience with ruthless banking tactics and the changes came on him like a ton of bricks," says Farash. "Without proper legal assistance, that became a vortex that he got sucked into, so that on the word of Fleet alone, the judge gave Fleet total control over the company’s building, computers, and bank account, on hours’ notice. From that point Tare was left in a die or die situation. If he allowed them to loot willingly, they would take over the company. If he filed for Chapter 11, he would be at the mercy of the bankruptcy trustee."
Tare, serving as his own attorney, has made multiple charges against Fleet. He has interested the ranking member of the house energy and commerce committee, Democrat John D. Dingell of Michigan, in his cause. In 2002 Dingell was starting to investigate the illegal practice of "tying," as when a bank requires monies to be kept in one account in order to get a loan from another account. Tare alleges that one of the reasons WebSci Technologies went bankrupt is that he was required to keep $4.3 million at a Fleet brokerage account in order to qualify for a $5 million credit line.
Fleet’s attorney, Louis DeLucia at Buchanan Ingersoll, says that the bank’s practice is to refrain from commenting on current litigation. A spokesperson for Fleet in Boston says that the bank had merely required Tare’s account to be used as collateral.
Tare denies that his financial troubles were due to a floundering telecom market. "Our source of income, AT&T, did not collapse. We had a product. Fleet choked the life on the product side."
The product to which Tare refers: Ensiva, an integrative tool that develops dynamic websites for different media — PC browsers, cell phones, and speech recognition applications. Tare was ready to take it to market when Fleet Bank made its move. Because some of the programmers have not been paid, just who owns Ensiva is in question, and what will happen to it has not been decided.
"They can drag us on to a point where we will run out of money to litigate," says Tare.
Tare believes, nevertheless, that the foreclosures were based on evidence withheld, and if that is true, they may be overruled. "The good news is that the regulatory agencies have started looking beyond me, and that people who lost their homes may get compensated," says Tare.
That’s possible but not probable, says Bruce M. Sattin, a commercial real estate and bankruptcy attorney at Szaferman Lakind. "If someone could show there was fraud or other illegal conduct in obtaining the lien on the property or the way the foreclosure was conducted, a foreclosure might possibly be overturned. Or the original debtors or guarantors could sue the lender for money damages, possibly getting punitive damages and attorney fees if they could show fraud," says Sattin. "However, I think that it is highly unlikely that the foreclosures can be reversed,"
"I hope other people get what they lost," insists Tare. "Some of them were crying on the phone when they talked to me. If five people get back their homes, then this will have been worth it."
— Barbara Fox
Web Sci Technologies, 4214 Route 1 North, Monmouth Junction 08852. R.S. Tare, president. 732-329-9000; fax, 732-329-0066.
Jim Clingham’s Old Company Finds New Home & Funding
In 1996 the late James Clingham left the David Sarnoff Research Center and opened the United States office of a German electronics manufacturer, Galaxis USA, at 20 Nassau Street. He turned to other projects a year later. Now, just a month after Clingham’s death, a Fort Lee-based holding company has bought the entire Galaxis business and is pouring money into it. For instance, it made a one-time payment of $14 million to pay off one vendor.
Through subsidiaries in India, the Fort Lee firm, Distinctive Devices, designs, develops, and produces software products, and it also makes multiple-access and digital subscriber line for telephone companies. Another subsidiary trades rough and polished gemstones. The acquired company, Galaxis Technology of Lubeck, Germany, has digital television software and set-top-box technology, and Galaxis hopes this technology will be the door to interactive television markets.
"Galaxis has a space age technology but had a financial dilemma and closed down," says Sanjay Mody, president of Distinctive Devices. "Galaxis could have found a shell company and gone public in the United States, but what was missing was the Indian component." His established base of software developers in India might result in millions of dollars in savings for Galaxis.
Mody’s family is from Palanpur, a small village in Gujarat that he says is known for controlling 60 percent of the world’s diamond business. He majored in economics at Bombay University, Class of 1979, and began working in Manhattan in the financial market in 1983. He invested in a wireless technology company in 2000, and in 2001 bought a company in India saddled with debt.
"We will retake the entire business, and it looks like there could be a significant business going forward. In Germany they are doing $50 to $55 million and have a steady stream of revenue," says Mody. "What’s missing is access to capital. I think Galaxis will show a decent amount of growth from the U.S. side."
— Barbara Fox
American Re Corporation, 555 College Road East, Princeton 08543-5241. 609-243-4200; fax, 609-243-4257. Www.amre.com
Employees of two London-based subsidiaries of American Re on College Road are buying out their companies. The sale is expected to close on Monday, November 10, for Becher + Carlson Risk Management Inc. ARB International Ltd. is also being sold to members of its management team. Terms were not disclosed.
Just two Becher + Carlson employees work on College Road.
Charles R. Cregar, 73, on October 31. A race car driver, he had owned Cregar Motors in Princeton and CR Cregar in Lawrenceville.
Thomas J. Zamerowski, 63, on November 1. He had been a chemist with the Sarnoff Corporation.
Joseph H. Colavita Jr., 70, on October 27. He retired in 1999 after 38 years as an animal research technician with American Cyanamid.