A U.S. bankruptcy court judge should dismiss fraud and other claims filed against former officials at defunct Charlotte bus maker DesignLine, attorneys for the defendants argued on Wednesday.
The bankruptcy trustee overseeing the liquidation of the company filed a wide-ranging suit in August against former company executives, alleging fraud, violations of racketeering statutes and breaches of fiduciary duty.
The suit filed by trustee Elaine Rudisill accused retired Air Force Gen. Buster Glosson, DesignLine’s former chairman, and his son, Brad Glosson, the company’s former CEO, of working to “pilfer assets” and “siphon monies” from the company, its creditors and its investors, according to the complaint.
The Glossons and others named in the suit have denied the allegations, and in federal bankruptcy court on Wednesday their lawyers argued before Judge Craig Whitley that many of the claims should be tossed out.
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“These are very damaging allegations, but they are nothing more than assertions and should be dismissed,” Mike Adams, an attorney for the Glossons, said during the day-long hearing.
Attorneys for Rudisill, however, said the case should continue moving forward. DesignLine filed for bankruptcy protection in August 2013, and Rudisill has filed dozens of suits that aim to recoup more money on behalf of the bankruptcy estate.
“We stand by the facts in the complaint,” said Michael Barrie, an attorney working with Rudisill. “These are really serious allegations.”
Among its more notable accusations, the suit alleges the Glossons in December 2009 hired Anthony Foxx, who had just become Charlotte’s mayor, in an “attempt to influence” him to secure government contracts. Foxx became U.S. transportation secretary in July 2013.
Foxx, a Democrat, is not a defendant in the suit, but Rudisill has sued him separately, seeking to recover almost $421,000 in pay from the former mayor. That suit alleges the former mayor received his pay from DesignLine despite doing little to no legal work for the company. Foxx has filed a motion to dismiss that case.
In Wednesday’s hearing, Adams said there were no facts backing the claim that the Glossons attempted to bribe Foxx. But Barrie pointed to statements Glosson made to the media about the revenue Foxx helped bring into the company, as business development and legal adviser to the board.
A group led by the Glossons bought DesignLine in 2006 and moved it to Charlotte from New Zealand, looking to capitalize on hybrid technology that promised lower emissions. DesignLine attracted high-profile investors such as former Gov. Jim Martin and businessman Cameron Harris. But over time, the company faced lawsuits and contract cancellations over late deliveries and performance problems, according to court documents.
During the hearing, Adams cited Gen. Glosson’s record as a Persian Gulf War hero and said the general has no intent on settling bribery and other claims. Barrie said a defendant’s stature doesn’t matter if he did something wrong.
Whitley said it will “take a little time” for him to review the matter. Separately, the Glossons have also asked Whitley to issue a summary judgment in their favor on some of the claims. Whitley said he will rule on the motions to dismiss first.