Clinton Savings Bank To Pay In Gitto Global Bankruptcy | Settlement reached in lengthy court battle
U.S. Bankruptcy Court Judge Joel Rosenthal recently approved a settlement that ends a number of lawsuits related to the Gitto Global Corp. bankruptcy case, which has been winding its way through the court system since 2004.
The settlement involves two banks — Clinton Savings and LaSalle Business Credit of Chicago — that did business with Gitto Global, a Lunenburg-based plastics firm that went belly-up after executives allegedly embezzled money from the business.
The order directs Clinton Savings Bank to pay $1.1 million to LaSalle Bank and $700,000 to the trustee of the estate of Gitto Global.
It also calls for Clinton Savings Bank to receive $600,000 from its insurance company, Progressive Insurance Co.
Clinton Savings Bank and LaSalle agreed to release attachments on property owned by Charles Gitto and Tradex Corp., which still owned a vacant lot next to the Gitto Global Corp. building on Leominster Shirley Road in Lunenburg.
The assets of the polystyrene resin company were sold to another plastics manufacturer now called S & E Specialty Polymers. It continues to operate on the former Gitto Global property.
Tax Matters
One of the last outstanding issues in the Gitto Global bankruptcy case is expected to be resolved by the end of the year: the $457,000 that the state’s Department of Revenue said the company owes the commonwealth. Gitto Global trustee Mark DeGiacomo, a lawyer with Murtha Cullina LLP of Boston, has objected to the amount because he claims it is based on an estimate, according to court documents.
Court documents state that all parties have approved the agreement because they want “to avoid the time, expense and inconvenience of protracted litigation,” and nothing in the agreement should be taken as an admission by any of the parties.
Clinton Savings did not return calls seeking comment for this story.
The Gitto Global bankruptcy case also led to a wave of countersuits between LaSalle and Clinton Savings Banks, the Gittos, and another Gitto company, Tradex Corp.
The settlement means all of those lawsuits will now be dismissed.
Gitto Global Corp. of Lunenburg filed for bankruptcy in the fall of 2004.
An independent examiner alleged that the father and son team of Charles and Gary Gitto, along with other corporate executives, Frank Miller, Louis J Pellegrine Jr. and William Deakin, defrauded LaSalle Business Credit of Chicago out of about $30 million and Clinton Savings Bank of about $6 million.
The trustee, and more recently, federal authorities, claim the men set up companies solely to move money back and forth between the fraudulent companies and Gitto Global and fraudulently changed the company’s inventory values and sales numbers to get more revolving credit.
They allege the men used the money for income taxes, boats, trips and remodeling projects for their homes.
A civil complaint filed in 2006 by the trustee for Gitto Global alleges that as early as December 2003 and no later than April 2004, Clinton Savings Bank knew that an account for one of the fraudulent companies was being used in the check kiting scheme the men were running.
The complaint also claims that the activity in the account was so great the bank had to borrow money from the Federal Reserve to cover the daily transactions.
It also states that the bank should have closed out the account once it realized what was happening.
This past September, all five executives with Gitto Global were indicted and arraigned on criminal charges stemming from their fraudulent activities, and their case is continuing.
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