Newport Creamery "Corporate Raider"
Newport Creamery -- the beloved Rhode Island chain of ice cream shops -- was sold by the Rector family in 1999 to Robert Swain, a Clearwater, Florida businessman.
Swain said he was going to grow Newport Creamery to 100 locations over five years.
The Rector family had started a milk business in Newport in 1928. The original Newport Creamery restaurant, which sold only ice cream, was opened in 1940. Sandwiches and food were added in 1953, according to the company's history.
Within two years the company was forced into bankruptcy. The receiver asserted that Swain and his wife, Linda had raided the company.
Fox News reported:
"Andrew Richardson was appointed to be an independent trustee in the case.
Richardson sued Linda Swain, alleging she took $900,000 from the Creamery for personal use with no intention of paying it back.
Richardson also asked U.S. Bankruptcy Court Judge Arthur Votolato to issue a preliminary injunction against Linda Swain. A hearing on that request continued last week.
When the Swains bought the ice cream chain in 1999, Newport Creamery's financial records show a $290,000 loan was made to Kapok Development Corp., a Florida land-development company controlled by Robert Swain, according to Alden Harrington, the lawyer representing Richardson.
That $290,000 was then loaned from Kapok Development to Tarpon Highlands Development Corp., another Florida business controlled by Swain.
"Kapok's borrowings were specifically targeted to pay for another development project," Swain said during testimony.
Although Linda Swain has not appeared in court for the hearings, Robert Swain was on the stand on Tuesday and Friday, The Journal reported.
The Creamery was eventually given partial ownership of Tarpon Highlands in return for the loans. But the restaurant chain has yet to see a return on that investment.
Tarpon Highlands filed for Chapter 11 bankruptcy protection in 1999.
In addition, $50,000 advanced to Robert Swain from the Creamery last May was used to pay off two of Swain's business colleagues in another Florida development project — Rutland Estates.
Swain testified that he put $50,000 back into the Creamery in June to help pay for the Creamery's health care benefits plan, which was in jeopardy when the company went bankrupt."