DUBAI, 8 January 2004 — Top jewelry group ARY has won a $1.5 million legal victory in the US courts. The Kansas Supreme Court ruled the owners of jewelry chain Krigel’s Inc were not entitled to $1.5 million in escrow funds after its proposed sale to the Dubai-based group fell through.
As reported in Gulf News last week, the court ruled against Scott Krigel and the Scott Krigel Revocable Trust saying ARY was entitled to the money.
The court was affirming a lower-court decision in favor of ARY, which had proposed to buy Krigel’s after the family-owned jeweler filed for Chapter 11 protection in January 2001.
ARY, chaired by Haji Abdul Razzak Yaqub, is one of the world’s largest jewelry groups with gold refining, bullion and jewelry manufacturing facilities. It was formed by three Pakistanis in 1970. Krigel’s was to be its first venture in the US.
At issue in the case was whether ARY’s ability to obtain financing from Foothill Capital Bank was a precondition of the stock purchase agreement. Although Krigel and the trust maintained it was not, the court disagreed and found Foothill’s unwillingness to extend the financing rendered the agreement null and void.
The court said because the financing condition affected both parties, ARY could be found to have breached the agreement only if both parties waived the financing condition. But only Krigel and the trust waived the condition.
The ruling is the latest development in litigation spawned by Krigel’s bankruptcy and the collapse of the ARY deal. Krigel’s assets were eventually auctioned off to Hannoush Jewelers for $9.3 million.
Unsecured creditors received nothing but the purchase enabled the stores to continue operating. ARY’s purchase agreement called for Krigel’s to file a prepackaged bankruptcy and for ARY to purchase its stock out of bankruptcy. ARY was to pay $50,000 for the stock, pay off $6 million, or 60 percent, of the chain’s unsecured debt and assume all of its $8 million in secured debt to Foothill.
The purchase agreement provided that if ARY failed to pay the unsecured creditors on the effective date of the bankruptcy plan, Krigel and the trust would be entitled to the escrowed $1.5 million.
Last year, ARY sued IBJ Whitehall Bank & Trust Co., a subsidiary of Industrial Bank of Japan, blaming it for killing the deal.
The lawsuit alleged that IBJ Whitehall passed on information to Foothill accusing ARY of “being involved in embezzling, bribery for contracts to mint gold coins for the Olympic Games in Sydney, Australia, and other illegal conduct.”
After it received the information from IBJ Whitehall, ARY alleged, Foothill changed the terms of the proposed financing arrangement, which led to the deal’s collapse.
