Litigation, Bad Publicity Has Been ‘Damaging’ To NY Chocolate, Attorney Says”

by Nicole Reome on 10 Oct 2007 at 7:57 am

FULTON, NY - While the fate of the New York Chocolate and Confections Company is still unclear, officials involved in the project say that one thing is crystal clear.

According to Paul Bankes Jr., the company’s Philadelphia-based attorney, continued bad publicity and a line of litigation are not making it any easier to guarantee chocolate will ever come from the plant.

Dr. Ousmann-A. Gbane, principal and CIO of Lion Capital Management, recently came forward with allegations of money laundering and embezzlement against those in control of the plant. Lion Capital is a 20 percent shareholder in New York Chocolate and Confections Company (NY3C). Coffee and Cocoa Regulation Funds (FRC) holds and 80 percent share of the company.

Gbane charges that $35.9 million in investor funding never made it to the Fulton plant. He accused those in control of sending the bulk of that money through a different business, IC Trading, in Georgia and said that mismanagement and frivolous spending has dwindled down funds that should have been used for production.

From his office Monday, Bankes defended the company and explained that he and the company treasurer, Yalle Agbre, are able to account for all of the money that has come to the United States and used for the company‘s benefit.

He pointed out, however, that a fractured relationship with Lion Capital is the source of many of the problems that the company faces today.

According to the attorney, the source of those problems date back to the early days of the project. Meeting more in court than face-to-face, Bankes said that NY3C spends a great deal of money and time in court battles with the minority shareholder.

Bankes explained that the account set up under IC Trading was created to receive wire transfers for NY3C, rather than using an account in Michigan that is owned by Lion Capital.

“When the company was incorporated in October 2003, there no bank account was formed,” Bankes said. “The money for the (project) was sent first to a Lion Capital account in Michigan. … Later, the funds were sent to IC (Trading) for the benefit of New York Chocolate. Yalle can account for all of that money.”

In early 2004, Bankes said an account was established at Key Bank in Fulton and the company funds were sent there. Those practices continued until Bankes was retained almost two years ago.

In that time, however, Bankes pointed out that NY3C has been involved in several lawsuits with Lion Capital for matters such as ownership rights and a tax reimbursement from the Empire Zone that he says Lion Capital received and used unlawfully.

Bankes said that NY3C sued Lion Capital in a California-based suit this past year after it discovered that a $565,000 Empire Zone tax refund that was due to NY3C was sent to and deposited by Lion Capital. Though a judge ruled in NY3C’s favor this past month, Bankes said that Lion Capital has not returned or accounted for the money.

“The litigation in Delaware and California has cost the company dearly,” Bankes said. “It has cost a lot of money and a lot of time. … (The company was) also deprived of the use of money that it needs until we can sort this out.”

During a press conference at the plant Monday, company CEO Jean-Claude Amon declined to answer questions about when production would start at the plant.

That same day, Bankes pointed out that those in control have not decided yet if it ever will.

“The decision has not been made yet if this (project) will go forward,” Bankes said.

Bankes pointed out that the company has been struggling to keep the plant in operation in lieu of an income from products. He noted, too, that the money required to bring the plant up to par and start production is substantial.

“We are struggling along, paying bills and hoping to sort this out,” Bankes said. He pointed out that is no easy task when faced with continuous litigation and negative publicity.

“The money spent just in litigation has been enormous,” he said.

In the two years that Bankes has been involved with the company, he said that the publicity from those lawsuits has been damaging.

“We have not been able to attract investors,” he said, noting that money holders are hesitant to get involved with a project that is routinely in court.

“Gbane has cost us,” Bankes said.

“He has been very clever in his litigation… and keeping his own expenses to a minimum,” Bankes added.

He noted that Lion Capital offered once to sell its shares of the project to the FRC.

“He made the offer for a laughable amount,” Bankes said, noting that the company would not even entertain the price tag Gbane put on the offer.

As for accusations of mismanagement of funding, Bankes noted that Lion Capital has its own questions to answer.

“(Gbane) received three or four wire transfers in Michigan,” he noted. “Despite several requests to know how he spent that money, that has not been accounted for either.”