Former furniture chain Heilig-Meyers in fraud lawsuit

Claim alleges company kept two sets of books

Furniture Today Staff -- Furniture Today, October 28, 2008

NEW YORK — Long-gone furniture retailer Heilig-Meyers is still making waves in a fraud case involving asset-backed securities that share some of the same characteristics of the investment instruments that led to the current financial meltdown.

The New York Times reported that the amended suit, filed by AIG and other investors against Bank of America in 2003, is set to go to trial in U.S. District Court in Manhattan.

The suit contends that the retailer kept two sets of books and used an accounting method that led investors to believe that Heilig-Meyers was more profitable than it was. The case involves asset-backed securities sold in 1998 that were pools of receivables - the financial contracts of Heilig's customers, who had bought furniture on credit.

Bank of America and the former First Union bank bought the majority of the securities but went on to sell the bulk of them to institutional investors. AIG and other investors bought about $300 million of the securities, which are now nearly worthless, the newspaper said.

Richmond, Va.-based Heilig-Meyers filed for bankruptcy protection in 2000 and subsequently liquidated and spun off subsidiary operations. Only Richmond, Va.-based The RoomStore, separated from the Heilig-Meyers estate, continues to operate.

Click here to read the New York Times story.