Columbia Data Products Inc., the IBM-compatible personal computer company now languishing in Chapter 11 bankruptcy, is in active negotiations to be sold, according to testimony yesterday in federal bankruptcy court in Rockville.
"It sounded like a dream come true," testified First Pennsylvania Bank Vice President Alan W. Armstrong, referring to an inquiry by Trans World Technologies Inc., an Indian-owned company, about acquiring Columbia.
First Pennsylvania, Columbia's largest lender, is owed more than $12.8 million by the company and is party to a suit to block former Columbia executives from launching a rival company, tentatively called Chesapeake Data Products.
Trans World Technologies apparently is not the only potential buyer. In response to questions, Armstrong wrote a list of the companies he maintained were interested in buying the computer company. The list was sealed by the court, and there was no mention of the status of any of those negotiations in the courtroom. Columbia's value as a company is one of the key questions to be settled in the bankruptcy litigation here.
Once a highflier in the personal computer industry, Columbia lost an estimated $40 million last year. The company filed for protection under Chapter 11 of federal bankruptcy laws early in May. After attempts to negotiate a reorganization agreement with creditors failed, Columbia's board resigned en mass June 7. Several officers, including the company's president, Robert Cross, then started Chesapeake.
According to testimony yesterday, the day after he launched Chesapeake, Cross contacted TWT -- which previously had been talking to Columbia -- as a representative on behalf of Chesapeake.
First Pennsylvania's Armstrong testifed that "Mr. Cross wanted to sell the Indians on his company. . . . He called me saying that the Indians were interested."
Should Columbia interfere with those negotiations, Armstrong said, Cross threatened that "he would sue me, sue my bank and sue my directors, and [he said] that I was being foolish and that we were going to spoil" Chesapeake's deal with Trans World.
The next week, Columbia's new bankruptcy trustee obtained a temporary restraining order prohibiting Cross from competing for Columbia's potential customers. Cross was found in contempt of the order the day after it was issued.
As of last night, Cross had yet to testify in his defense in bankruptcy court.
In testimony so far, witnesses for Columbia's bankruptcy trustees have charged that Cross, who was called in last year to turn Columbia around, had grown more concerned about starting a new company than rescuing Columbia.
However, in cross examination, Cross's attorney attempted to establish that a volatile personal computer market made it difficult to ascertain whether Columbia's proprietary knowledge was truly proprietary.