Top executives at bankrupt Great Northern Paper Inc. have been in a bitter court battle for at least 10 months, according to Canadian court records. The former partner of GNP owner Lambert Bedard filed suit against him alleging he was forced out of the company.

The lawsuit filed in Montreal Superior Court by Joseph Kass in March 2002 seeks complete ownership of Inexcon Papers Inc., a company the two men own equally, reinstatement of his position as chairman and chief executive officer of Great Northern Paper and back pay of $380,000 and other costs. The case is still pending. No court date has been set.

Details of the lawsuit show a battle between the two owners for control of Great Northern and indicate the power struggle may have hampered GNP’s chances for obtaining a $70 million loan in 2001 to help the financially troubled company. The documents also revealed the two men did not use “one cent” of their own money to buy Great Northern for $120 million from Bowater Inc. in August 1999.

Bedard conveyed through Brian Stetson, GNP’s spokesman, that he views the suit as a private matter and is not willing to comment on it.

“The bad relationships that unfolded last year, what has happened to the mills and to the towns is very sad,” Kass said in a telephone interview earlier this week. “When my wife died two years ago, I did not expect this would happen. I got squeezed out.”

In the suit, Kass alleges that Bedard orchestrated his removal as chairman and CEO of Great Northern, illegally terminated his pay as a corporate consultant and isolated him from the decision-making process and the day-to-day operations of the company. He said Bedard’s actions were motivated by his ultimate desire to force him to sell his shares of GNP for a discounted price.

Bedard denied the allegations and is asking the court to dismiss the suit and to order Kass to pay him $125,000 plus interest and other costs, according to court records.

When the two men bought Great Northern in 1999, Kass, whose expertise is finance, was chairman and CEO, and Bedard, whose expertise is engineering, was the vice chairman and chief operating officer. The purchase was made through Inexcon Papers, a Canadian company owned 50-50 by Kass and Bedard.

A year later, Bedard and Kass, who also operated their own consulting companies, entered into multiyear agreements with Great Northern, which was to pay those companies $385,00 a year for general management and corporate services. For the first year, Bedard and Kass were each paid $20,000 a month by GNP, which was increased to $25,000 a month in 2000. In August 2001, Kass said Bedard illegally terminated Kass’ consulting agreement, yet continued to pay himself.

Relationship eroded

Kass said his relationship with Bedard began eroding about eight months after they purchased Great Northern. He said Bedard had made insinuating phone calls to him, acted abusively and made disparaging and negative comments to frustrate him so he would sell his ownership in GNP at a ridiculous price. He said he was kept in the dark about company operations.

Bedard, in court documents, said Kass did not know what was going on because he was not attentive to his responsibilities. Bedard maintained Kass kept himself out of the loop by not being involved with the company’s finances, which were part of his duties.

Kass said in May 2001 Bedard proposed cutting Kass’ consulting fee of $25,000 a month to $5,000. He said Bedard offered him $15.3 million for 50 percent of his shares in Inexcon Papers. Kass rejected the offer.

Kass said at the same time Bedard and Timothy J. Morgan, then GNP’s financial officer, were meeting with officials of John Hancock Life Insurance Co. seeking a $70 million loan for the operations of Great Northern. Kass said on several occasions he asked to participate, but was told by Bedard his presence wasn’t necessary.

A few weeks later, Bedard and Kass both met with John Hancock officials in Boston. Kass said he was not given any of the materials Bedard and Morgan presented to bankers and said that the following day, Bedard met with the bankers alone. A few days later, Kass said, Bedard told him Hancock would lend the money, but only on the condition that Kass step down as chairman and CEO of GNP. Kass said he was shocked because John Hancock officials never mentioned a condition to him.

During a June 2001 GNP board meeting, Kass expressed concern about Bedard’s conduct. Kass said Martin Eisenstein, an attorney and board secretary, told directors Hancock would not fund the loan if the present slate of officers held office, specifically, Kass.

Ousted by vote

At the June 2001 meeting held in Montreal, the GNP board unanimously approved the loan and in a separate vote opposed the re-election of Kass as chairman and CEO by a vote of 4-2. Court documents did not list how each director voted. The board then elected Bedard as GNP’s new CEO and Benoit Michel as chairman by a vote of 3-0. Four directors abstained from voting.

A month later GNP board member John P. Kelsall resigned in protest, Kass stated in the court documents, which did not list Kelsall’s address.

Kass said GNP board member Robert Leathers of East Millinocket, who voted for the loan and his removal, later apologized to him, saying he had done it to ensure the company got the money it needed.

Kass alleges that the “mastermind and architect” behind the vote to remove him was Bedard, who had “planted the seed,” manipulated the board to expel him and hid behind the board’s decision.

Bedard said he did not manipulate the board, but that the board members acted in good faith and properly executed their duties. He said Kass’ firing was entirely a condition of the loan, which was a matter decided by the company’s board of directors.

Kass said he found it hard to believe a reputable financial institution like John Hancock would impose a loan condition that would create a shareholder dispute.

“What is even more questionable, if true at all, is that John Hancock would lend $70 million to a corporation where it had intentionally created a major dispute with the two partners putting its loan in jeopardy,” Kass stated in the court records. “It is a well-known fact in the industry, that financial institutions will refuse to lend money when there is a conflict about the control of a corporation between the shareholders.”

A John Hancock official declined to comment on the matter Friday.

Loans, loans, loans

At the June 2001 GNP board meeting, Kass said, he found out that Bedard had negotiated a $1.3 million short-term loan with the Katahdin Federal Credit Union in Millinocket. He said for some reason the loan was advanced to Inexcon of Maine, a separate holding company, and was secured with assets of Great Northern. Kass said the board also approved a 30-day loan of $700,000 from the credit union to be funded to Inexcon of Maine and secured by a transfer of assets from GNP to Inexcon of Maine.

On June 14, John Hancock withdrew the loan agreement. Kass said Bedard refused to reinstate him.

Later, Kass said he was advised by GNP President Eldon Doody, who resigned from the company last month, and Morgan, GNP’s CFO, they were unilaterally terminating his consulting agreement. He said the move was illegal and invalid and only the board had the authority to do so.

The GNP board opposed considering the reinstatement of Kass at its Aug. 24, 2001, meeting by a 3-2 vote.

Last week, Leathers resigned from GNP’s board, saying he had done so because of recent decisions by the company not to operate and he was affected personally. He declined to comment further.

In the court documents, Bedard outlined the financial arrangements for the purchase of Great Northern. He said the purchase was 100 percent financed and he and Kass had succeeded in their project without either one having to contribute “one cent” of their own money.

Bedard said he secured a $60 million short-term loan from the Bank of Montreal along with a $15 million line of credit and $60 million from Duke Solutions, which was eventually to lead to the acquisition by Duke of a 40.9 percent share in the electricity produced by GNP. Bedard also said he secured $5 million from Mendel Schwimmer, a New Jersey businessman and investor, for 10 percent of the shares of Inexcon of Maine.