Bank In Line To Get Assets In Dairy Case Foremost Dairies Bankruptcy Winding Down After 6 Years

A court representative for bankrupt Foremost Dairies Northwest milk bottling company wants to award the estate’s entire $11.6 million in assets to U.S. Bank of Washington and destroy some records.

The motion from court-appointed trustee Robert Steinberg is opposed by former Foremost employees and some dairy farmers who lost nearly $3 million in 1990 when the company, which operated a Spokane dairy, collapsed.

A hearing on the matter has been scheduled Sept. 20 before U.S. Bankruptcy Judge Karen Overstreet in Seattle.

Creditors fear that Steinberg will destroy records that support their allegations that U.S. Bank was an investor - not a lender - to Foremost. That’s an important distinction because a judge would not distribute assets of a bankrupt company to an investor.

“This trustee is there to make sure U.S. Bank gets a check for $11 million,” said James Moilanen, a Bellevue real estate consultant who claims Foremost owes him $658,000 in lost pay and other benefits. “Yet he’s suppose to protect the interest of all creditors. There must be a big smoking gun in those records.”

Steinberg is seeking to destroy only records he and his attorney possess. Records kept at bankruptcy court, including some sealed in 1990, would be retained.

When asked about the case Thursday, Steinberg hung up the telephone.

U.S. Bank has said it would not discuss the case.

Jan Ostrovsky, U.S. Trustee for the Pacific Northwest, recommends that court-appointed trustees keep records for two years after a case in closed. However, when case files are too numerous to store, he said, a judge may permit records to be destroyed immediately.

In a motion filed earlier this year to close the case, Steinberg wrote that the bank is first in line to receive Foremost’s accounts after legal fees are deducted. Steinberg and his attorney expect to collect $151,600 this year for administering the estate.

U.S. Bank got entangled in the Foremost deal in 1989 when it lent millions to Florida businessman Michael Cameron to assist him in a leveraged buyout of the former Carnation dairy. The deal included bottling plants in Spokane and Seattle and a warehouse in Portland.

By mid-1990, Cameron’s deal had gone sour and Foremost was scrambling to pay back loans. Moilanen, who was under contract with Foremost at the time, attempted to sell the Spokane dairy for $4.5 million to the city of Spokane as a site for the new arena, records showed.

Moilanen, who now owns the Alexander James Co., a Bellevue real estate developer, believes U.S. Bank financed a deal that required no equity from Cameron. Under such an arrangement, Moilanen said, U.S. Bank would be an investor, not a lender and, therefore, not entitled to Foremost’s assets.

“When their investment went bad, they decided they were a lender,” he said.

The Foremost estate in 1991 sold the Spokane dairy to Goodale & Barbieri Cos. hospitality company, which renamed it Broadview Dairy. The estate collected $850,000 from the sale, bankruptcy records indicated.

Cameron currently is serving a 21-month federal prison sentence for tax evasion.

, DataTimes