The former owner of Tougher Industries has lost the first of several federal court cases related to the near demise of the heating and air conditioning company.
In Albany on Monday, U.S. District Court Senior Judge Lawrence Kahn ordered Steven Shaw to pay $100,000 plus interest to the three business partners from whom he bought Tougher in 2005. The judge also directed Shaw to deliver at least $1.65 million to a surety as collateral for certain bonding obligations.
In November 2006 — about three weeks after Tougher filed for Chapter 11 reorganization in U.S. Bankruptcy Court in Albany — Richard Abramo, Robert Brown and John Tomassetti sued Shaw over breach of contract allegations.
Shaw and the trio of investors acquired the downtown Albany HVAC company — once one of the largest in the Northeast, with more than 200 employees — from PSEG Energy Technologies in 2003. They each acquired a 25 percent share in the business. Shaw brought his partners’ shares in 2005.
Although Shaw fulfilled the 2005 stock purchase agreement’s provision to pay an initial lump sum of $150,000, he allegedly failed to make four additional $25,000 payments. By October 2006, both Shaw and his former partners needed to make a $480,000 collateral deposit to cover outstanding risks to a surety. The trio of investors argued Shaw was responsible for that pledge, which went unpaid and grew to $1.65 million.
“We think it was not the right decision, and there were some factual and legal issues the court overlooked,” said Shaw attorney Justin Heller. He said Shaw will appeal Kahn’s summary judgement to the 2nd U.S. Circuit Court of Appeals in New York.
Since Tougher sought a bankruptcy court’s protection, a series of legal charges have been levied against Shaw. He allegedly stole hundreds of thousands of dollars from the company and nearly ran it into the ground.
In September, the federal government charged Shaw in U.S. District Court with knowingly making false statements for the purpose of influencing the action of an institution whose deposits are insured by the Federal Deposit Insurance Corporation. He allegedly lied to Berkshire Bank to obtain a $6.1 million loan.
Tougher’s court-appointed Chapter 11 Trustee Lee Woodard has also filed two complaints against Shaw in U.S. Bankruptcy Court. Those suits regard Shaw’s alleged use of Tougher funds for a Lake George property and other personal uses. Woodard has also filed bankruptcy court complaints against Shaw’s wife and two friends.
Since taking over Tougher shortly after the Chapter 11 filing, Woodard has managed to turn the company around, secure HVAC contracts and slowly rebuild its work force. He also consolidated the business’ facilities on Broadway. In November, Bankruptcy Court Judge Robert Littlefield authorized the $650,000 sale of Tougher to Tougher Mechanical Enterprises, an affiliate of J Norbert Properties, which has an HVAC division in Massachusetts.
Neither Woodard nor David Cabaniss, an attorney for the three former Tougher investors, could be reached for comment Friday.
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