Bedard, Inexcon say lawsuit unfounded

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BANGOR – A lawsuit that claims that Lambert Bedard and Inexcon Maine concocted a “wrongful and improper scheme” to acquire land and property from Great Northern Paper Inc. is “baloney,” according to an attorney for Bedard and Inexcon.

The lawsuit, filed Tuesday in federal bankruptcy court, alleged that Bedard and possibly others devised a “convoluted scheme” to obtain about $3 million in loans in 2001 using the land and property as collateral and now they are refusing to give the land and property back to Great Northern.

According to the lawsuit, Great Northern’s board of directors agreed to transfer the land and property to Bedard and Inexcon Maine so that they could use the assets as collateral to secure loans in their names and then give the money to Great Northern.

The lawsuit, filed by Boston attorneys representing bankrupt Great Northern, stated that many of the board members did not know that certain parcels of land and property considered to be vital to the operations of the mills were included in the deal. “I am highly skeptical of that,” said Nicholas Walsh, a Portland attorney representing Bedard and Inexcon Maine, who added that the lawsuit is unfounded.

He said the board members acted upon the advice of “skilled, painstaking attorneys” who disclosed all information about the properties to them so that they could make a sound decision.

“There’s nothing mysterious here,” Walsh said. Among the properties transferred to Inexcon Maine in 2001 were 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 important 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. The successful bidder is required to close the sale by April 21.

“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.

“This land was obtained honestly,” said Walsh, adding that Inexcon and Bedard have titles to it. “It was an honest deal. It was a fair deal. It was a square meal deal.”

Walsh said he wonders why Great Northern’s bankruptcy attorneys filed the lawsuit less than two weeks before the court-scheduled auction of the mills. He said when attorneys are hired to represent a bankrupt company, their first job is to “marshal the assets.”

“They find out where the money is,” Walsh said.

Great Northern’s attorneys, he said, “have known about the conveyance of the land.”

Great Northern’s attorneys did not return telephone calls for comment Wednesday.

The disputed land and property must be in the possession of Great Northern for a sale to proceed on schedule, said Robert Keach, an attorney for Belgravia Paper Co., the Canadian firm that has offered $91 million to buy Great Northern.

“It’s a condition of the closing of our sale that the operating assets be returned to Great Northern,” said Keach on Wednesday, adding that a paper company cannot function without a landfill.

Belgravia’s $91 million offer is what is called a “stalking horse bid,” and other companies interested in buying Great Northern must bid at least $2 million more. In addition, other companies wanting to buy GNP must be willing to pay Belgravia a $5 million “breakup fee” if they are successful in topping the Canadian firm’s offer.

John McVeigh, a Portland attorney representing Boeing Capital Corp., which is Great Northern’s primary lender, said Wednesday that if the land is not transferred back to Great Northern, the sale of the paper company is in jeopardy.

“If this sale doesn’t occur, bad things could happen all around,” McVeigh said.

BCC, which is owed more than $75 million from Great Northern, has been meeting with a number of companies interested in buying the two mills in Millinocket and East Millinocket.

According to Walsh, Inexcon Maine and Bedard have offered to sell the assets or “lease them at less than market prices” to the companies interested in buying Great Northern. He said their offers have been turned down.

“We have offered to do business with the estate, on reasonable terms,” Walsh said. “It’s an asset that has value and we don’t want to give it away. We’ve attempted to be reasonable every step of the way.”

In Great Northern’s lawsuit, bankruptcy Judge Louis H. Kornreich is being asked to order Bedard and Inexcon Maine to return the land and property. Kornreich also 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. He is expected to address the lawsuit sometime before April 21.

“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.

The lawsuit stated that the properties were used to obtain three loans at Katahdin Federal Credit Union in Millinocket. Two of the three loans, 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 Great Northern’s 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.

On Wednesday, Walsh said Inexcon Maine and Bedard gave all of the money to Great Northern. He added that Bedard made personal guarantees for at least one of the loans.

“They didn’t receive less than $3 million,” Walsh said. “It’s a less-than-earth-shattering allegation. In fact, all of it went to GNP.”

Walsh said Bedard and Inexcon Maine are hiring bankruptcy attorneys from New York City to prepare an official response to the lawsuit. That response should be completed in about 10 days, right before the auction.