GNP trustee sues East Millinocket

BANGOR – The trustee of Great Northern Paper Inc.’s bankrupt estate wants the town of East Millinocket and its water department to return $19,000 it was paid by the paper company before the bankruptcy filing.

In a lawsuit filed last Friday, Bangor attorney Gary Growe, who acts as the trustee, stated that the town and its waterworks may have been paid preferentially over other creditors in the 90 days before Great Northern’s January 2003 bankruptcy filing.

The town and its water department are not the only ones that have been sued.

According to bankruptcy law, a trustee is permitted to go after money paid to creditors in a manner that could be viewed as preferential, such as receiving a payment out of the ordinary course of business. Hundreds of what are called “preference payment” recall letters have been sent out since the bankruptcy filing and many of the recipients have settled or have proved that there was nothing extraordinary about how they were paid.

More than 160 businesses, however, have been sued to return the alleged preference payments. Many of those cases have been settled or dismissed.

The trustee has two years from the date of the bankruptcy filing to seek the return of preferential payments. The clock runs out in January.

Also sued last Friday were Dead River Co., for more than $120,000, and Fastco Fabrication Inc. of Lincoln, for almost $92,000.

In a separate filing, Growe stated that he has reached a compromise with former mill manager Eldon Doody and 11 other individuals or businesses over alleged preference payments. According to court documents, Doody received $6,120 from Great Northern in the 90 days before the bankruptcy. Doody and Growe have agreed that Doody should return $2,000.

In total, Growe sought nearly $600,000 from the 12 individuals and businesses and settled with each of them for a combined $104,000. A federal bankruptcy judge must approve the settlements.

Doody’s involvement with the trustee is not over. He is a defendant in two separate lawsuits filed by the trustee against Great Northern’s board of directors, of which he was a member, and an insurance company that issued a policy to Great Northern. Doody also is named in a lawsuit filed by Great Northern’s biggest lender, Boeing Capital Corp. of Long Beach, Calif., against Great Northern’s board of directors.

Great Northern’s two mills in Millinocket and East Millinocket were sold in April 2003 to Brascan Corp. of Toronto and operate under the name Katahdin Paper Co.