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Article Excerpt
Unsecured creditors of linen retailer Strouds Acquisition Corp. have launched an investigation into whether the chain's management, lenders or secured creditors engaged in self-dealing prior to its filing for Chapter 11 bankruptcy protection in May.
The forensic accounting arm of BDO Seidman has been hired to determine if preferential payments, fraudulent money transfers or breaches of fiduciary duty occurred, said Jeffrey Garfinkle, a lawyer for the unsecured creditors.
It's "a little early to make an assessment of where the culpability is," he said.
But the investigation is expected to look at the dealings of Walter Cruttenden, the Newport Beach financier whose private equity firm, Cruttenden Partners, brought Strouds out of its first bankruptcy in April 2001.
"He stands to lose a lot more than anybody else on this deal," said Aaron Malo, a lawyer for Cruttenden.
Malo would not indicate how much Cruttenden Partners had invested in the company. Cruttenden himself was out of town last week and could not be reached for comment.
Meanwhile, Strouds is in the process of liquidating...
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