Sherman Industry must liquidate, orders judge

A federal judge Tuesday ordered Sherman Industry Inc., a Westbury home remodeler that lost its licenses to operate on Long Island amid consumer complaints, to liquidate rather than reorganize and resume operations.

At a hearing at the federal courthouse in Central Islip, U.S. Bankruptcy Court Judge Alan S. Trust ordered that Sherman's bankruptcy be converted from Chapter 11 of the U.S. Bankruptcy Code to Chapter 7, according to a spokesman for the Eastern District federal court clerk.

On Monday, Judge Trust appointed an interim trustee for the case and set a creditors' meeting for 11 a.m. Sept. 3 at the courthouse in Central Islip.

On Monday, the Office of the United States Trustee asked Trust to either dismiss Sherman's June 25 application for protection from creditors and reorganization under Chapter 11 or convert it to a Chapter 7 liquidation proceeding, in which the debtor's nonexempt assets, if any, are sold by the trustee and the proceeds distributed to creditors according to the priorities established in the bankruptcy code.

The request made to Trust said that Sherman, which is not operating, "has failed to demonstrate to the court and the trustee that it has either the means or the desire to proceed toward a successful reorganization."

Homeowners who complained to consumer affairs officials in Nassau and Suffolk and to Newsday accused Sherman of starting jobs and not completing them, doing poor work and misdirecting hundreds of thousands of dollars in customer deposits and progress payments that should have been held in an escrow account. The company specialized in geothermal heating and cooling systems. Company lawyers have not responded to requests for comment.

Nassau County revoked Sherman's home repair license on June 26 because it failed to appear for a hearing on 10 consumer complaints against the company. A county spokeswoman said last week the county now has 30 complaints and the matter has been referred to the office of District Attorney Kathleen Rice, where a spokesman said an investigation is underway.

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Suffolk County's consumer affairs office received 16 complaints that went unresolved or unanswered and, as a result, it did not renew Sherman's license when it expired May 1.

"This Chapter 7 decision was a good one, but it still leaves people suffering," said one of the aggrieved homeowners, teacher Jessica Boyle of Bohemia, who administers a Facebook page with more than 60 Sherman customers as members.