Reunion Industries shareholder's examination request denied

By Caroline Salls

Pittsburgh, May 21 - Reunion Industries, Inc. shareholder LC Capital MasterFund, Ltd.'s motion to force some of Reunion's past and present officers and directors to produce documents related to settlements entered into by the company, as well as the company's failure to sell its CP Industries division in 2007, was denied Tuesday by the U.S. Bankruptcy Court for the District of Connecticut.

According to the motion, the shareholder believed a formal investigation was necessary to consider transactions that may have been made to personally benefit the officers and directors at the expense of shareholders. LC Capital said it believes information related to the transactions was misrepresented to shareholders to avoid their discovery.

Specifically, LC Capital claimed Reunion's board acted to preserve its directors' equity interests at the expense of other stakeholders in early 2007 when they ignored an unsolicited indication of interest from a potential purchaser of the CP Industries division.

LC Capital believes the sale amount would have been more than sufficient to repay creditors in full.

The shareholder also mentioned a 2005 transaction in which Reunion's management announced a $1.65 million settlement of a $5 million judgment. LC Capital alleges Reunion's management urged the company's creditors to finance the settlement but failed to disclose that Reunion assumed the judgment obligation in a sham acquisition of a company wholly owned by former Reunion chief executive officer Charles Bradley. LC Capital said Bradley personally guaranteed the original debt, making the obligation against him.

Reunion paid Bradley a guarantee fee related to the transaction, which may have been a fraudulent transfer, the shareholder said.

Additionally, LC Capital said Reunion claimed in March 2006 to have settled a $1.02 million obligation with an unidentified noteholder for an immediate disbursement of $400,000. LC Capital believes the noteholder was then-CEO Bradley.

LC Capital beneficially owns about 10% of Reunion's common stock and is its third-largest shareholder, according to the motion.

Reunion, a Pittsburgh-based manufacturer of metal and plastic products, filed for bankruptcy on Nov. 29, 2007. Its Chapter 11 case number is 07-50727.

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