November 14, 2024
Business

Inexcon, Bedard sued over land deal Suit says GNP properties used for $3M in loans

BANGOR – Lambert Bedard and Inexcon Maine, the parent company of Great Northern Paper Inc., are refusing to return millions of dollars worth of land and property they allegedly transferred from the bankrupt company to themselves in 2001, according to a lawsuit filed in federal bankruptcy court Tuesday.

The lawsuit claims that Bedard and possibly others “devised a wrongful and improper scheme” to obtain about $3 million in loans in 2001. Great Northern’s board of directors agreed to give Bedard and Inexcon Maine parcels of land and property so that they could use the assets as collateral to secure loans in their names for Great Northern, according to the lawsuit.

Two of the three loans obtained at Katahdin Federal Credit Union in Millinocket, totaling $2.35 million, were written in Bedard’s name, according to the lawsuit, which included copies of the loan agreements, and the third, for $700,000, was written out to Inexcon Maine.

The lawsuit stated that the board of directors agreed to the land transfers with the understanding that the loans to Bedard and Inexcon Maine were “to be used for the business purposes of [GNP].”

According to the lawsuit, “GNP received less than the over $3 million in Katahdin loans that were obtained by Inexcon as a result of the transfers.”

The lawsuit does not specify how much money Great Northern actually received from the loans.

According to the lawsuit, Great Northern’s board agreed on June 1, 2001, to put up the parcels of land and property as collateral because it knew that the paper company was financially insolvent. Great Northern filed for bankruptcy 11/2 years later, on Jan. 9, 2003.

Great Northern received a working capital loan from Congress Financial Corp. in January 2001 that prohibited the paper company from seeking any other loans and selling any of its property, the lawsuit stated.

In what’s considered an unusual twist, Boston attorneys hired in early February to represent bankrupt Great Northern and its new court-appointed management team filed the lawsuit against their clients’ owner.

Up until Feb. 5, Bedard was president and chief executive officer of Great Northern Paper, but after weeks of discussions that included Gov. John Baldacci, he agreed to step aside and allow three former executives to come back and prepare the mills for a sale. Bedard continues to have roughly 45 percent ownership in Inexcon Maine, which is 100 percent owner of Great Northern.

In a telephone interview Tuesday evening from his home in Quebec, Bedard said he could not comment on the lawsuit because he had not received it yet.

In their lawsuit, the attorneys stated that they are continuing to investigate the land transfers, and other individuals could be added to the court action at a later date.

“GNP, as debtor and debtor-in-possession [in a bankruptcy case], is currently investigating as to whether other persons or entities were implicit in this wrongful scheme,” the attorneys wrote in the lawsuit.

The property transferred to Inexcon Maine included Great Northern’s “guest house,” its Dolby landfill in East Millinocket, its wood chipping scales at the entrance of the Golden Road in Millinocket, and Hillcrest Golf Course in Millinocket.

Great Northern wants those properties back, according to the lawsuit, because they are vital assets needed to complete a sale of the bankrupt company. A court-ordered auction of Great Northern is scheduled for 9 a.m. on March 21 in federal bankruptcy court in Bangor.

“In the face of defendants’ continued wrongful refusal to transfer the properties back to GNP, it is critical that the property be transferred back to GNP so that the sale may proceed as ordered,” wrote Boston attorneys Timothy Langella, Daniel Bleck and Hillary Meltz in the lawsuit.

Bankruptcy Judge Louis H. Kornreich is being asked to order Bedard and Inexcon Maine to return the land and property, and he is being asked to add Inexcon Maine to Great Northern’s bankruptcy case because the two companies’ finances have been commingled over the last three years as partners.

“GNP’s assets and liabilities are so intertwined with those of its parent, Inexcon [Maine], that it would be impossible or financially prohibitive to disentangle their affairs,” according to the lawsuit.

Great Northern also is seeking to be paid compensatory damages, costs and reasonable attorneys’ fees.

Even though Great Northern had orders for its products, the company was essentially broke in June 2001. During the June 1, 2001, meeting of Great Northern’s board of directors, it was announced that at least five lenders had turned down the company’s loan requests and vendors were threatening to cut off supplies.

Great Northern’s president when the loans were made, Eldon Doody, told the directors that the company was “in dire need of money,” according to the lawsuit, which included a copy of minutes of the meeting. He said Great Northern was at risk of “irreparable damage to its employees, the corporation and the communities in which it operated” unless it received immediate funding, the lawsuit stated.

“As reflected in the June 1 [2001] minutes, both Doody and [chief financial officer Timothy] Morgan believed that, in the absence of financing, GNP would not survive beyond June 30, 2001,” according to the lawsuit.


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