Trial to decide if GNP owes credit union

BANGOR – A March trial has been set on a lawsuit to determine whether Katahdin Federal Credit Union should be paid $3.2 million it loaned the previous owners of the former Great Northern Paper Inc.

The trial, scheduled to begin March 7 and last four days, was to take place last March. It was delayed while the trustee for Great Northern’s bankrupt estate, Bangor attorney Gary Growe, pursued a judicial ruling that the credit union was not entitled to the money.

Last month, U.S. Bankruptcy Chief Judge Louis H. Kornreich ruled that the trustee proved that a transfer of property from Great Northern to its parent company, Inexcon Maine, was fraudulent. However, Kornreich said the trustee still would have to prove whether Katahdin Federal Credit Union was aware that it was receiving fraudulently transferred property as collateral when it loaned the money.

In 2001, Lambert Bedard, co-owner of Great Northern and Inexcon Maine, took out three loans totaling $3.2 million from Katahdin Federal. He said the money was used by the financially strapped paper company.

To secure the money, Bedard got approval from Great Northern’s board of directors to transfer several properties to Inexcon Maine, with the properties used as collateral for the loans.

The properties, excluding the company’s guesthouse, were returned to the paper company in March 2003 after Kornreich ruled that they were needed to complete a sale of bankrupt Great Northern.

However, the judge ordered that $3.6 million from the paper company’s purchase price be placed into an escrow account while Katahdin Federal pursues legal action to claim it is entitled to the money. The extra $400,000 is interest.

Boeing Capital Corp. of Long Beach, Calif., one of Great Northern’s primary lenders, who would receive the $3.2 million, and the trustee are fighting Katahdin Federal’s efforts. In court documents, Boeing and Growe have stated that Katahdin Federal did not follow proper regulatory guidelines when reviewing the loan applications and if it had, the credit union would have realized the paper company’s dire financial straits and not loaned the money.

Katahdin Federal has denied any wrongdoing.