THE VIRGINIAN-PILOT
Copyright (c) 1997, Landmark Communications, Inc.
DATE: Wednesday, January 15, 1997 TAG: 9701150431
SECTION: BUSINESS PAGE: D1 EDITION: FINAL
SOURCE: BY MARC DAVIS, STAFF WRITER
DATELINE: NORFOLK LENGTH: 58 lines
A lawyer who challenged the bankruptcy of Computer Dynamics Inc. last year has been cleared of criminal contempt of court in connection with the case.
Norfolk lawyer Stephen Merrill was accused of passing confidential court documents in the case to a client, company founder R. Alan Fuentes. A bankruptcy judge had ordered Merrill last year to explain why he should not be held in contempt of court for those actions.
Merrill demanded a jury trial, and the case was sent to the U.S. District Court.
On Christmas Eve, federal prosecutors decided not to press the criminal contempt charge against Merrill. As a result, U.S. District Judge Raymond A. Jackson dismissed the charge against Merrill last week.
``It feels good to be exonerated,'' Merrill said Monday.
But Merrill isn't out of the woods yet.
In a related development, a bankruptcy judge ruled last week that Merrill will be sanctioned for filing defamatory accusations against the company's current owner, Robert L. Starer, with ``improper purposes.''
The penalty could be a fine of tens of thousands of dollars to compensate Starer for legal fees in defending himself, and to pay the court for time spent.
Bankruptcy Judge David H. Adams did not explain his Jan. 8 order against Merrill and did not issue a written opinion. A hearing will be held soon to determine the amount of sanctions.
Merrill said Monday he did not understand why Adams ruled that the accusations against Starer were filed with ``improper purposes.'' He said he wanted to have wrongdoings investigated and the company's creditors compensated.
Starer, however, has said Merrill filed false accusations against him to ruin his reputation.
Starer spent months defending himself against the charges in court and eventually prevailed. Adams ruled last March that there was no proof of fraud or impropriety by Starer.
Computer Dynamics, based in Virginia Beach, was once one of the biggest minority-owned businesses in Hampton Roads. Fuentes founded the company in 1979 as a defense contracting firm, then branched into computer and career education and other fields.
Starer took over in 1992 after Fuentes pleaded guilty to a felony, making illegal campaign contributions. Starer and Fuentes have been feuding ever since, with Fuentes trying to win back control of the company.
Creditors forced Computer Dynamics into involuntary Chapter 11 reorganization in May 1995. The company is now defunct. It has no employees and does no business. Some former subsidiaries, including the career education school that still bears the CDI name, are now independent companies.
Merrill was involved in the case in two ways: He represented Fuentes in his personal bankruptcy and represented several creditors in Computer Dynamics' bankruptcy.
Merrill asked the Bankruptcy Court to appoint a trustee for the company in November 1995, accusing Starer of fraud and other misdeeds. That effort failed after seven days of testimony, mainly from former company officials.
KEYWORDS: COMPUTER DYNAMICS