BANGOR – A California creditor that lent former Great Northern Paper Inc. more than $60 million filed a federal lawsuit Wednesday accusing the paper company’s nine owners and directors of fraud.

BCC Equipment Leasing Corp. of Long Beach, Calif., claims the owners and directors painted a rosy picture of Great Northern’s finances when instead they were secretly participating in a “desperate scheme” to obtain millions of dollars in loans to keep the company open, according to the lawsuit.

BCC, a subsidiary of aerospace giant Boeing Corp., stated in the lawsuit filed in U.S. District Court in Bangor that it was deceived by Great Northern beginning in mid-2002 when it agreed to purchase and subsequently lease back most of the company’s equipment for $50 million. Great Northern operated mills in Millinocket and East Millinocket.

The lawsuit seeks unspecified damages.

The California lender also stated that the extent of the alleged scheme didn’t become clear until a couple of months after Great Northern filed for bankruptcy and after BCC already agreed to lend the paper company another $10 million to keep its closed mills maintained during the winter.

According to the lawsuit, BCC asserts that Great Northern “misrepresented and omitted” that it was operating illegally, was in violation of Maine’s environmental laws, was in default with a major creditor and that it “secretly” transferred company property.

The nine owners and directors “knew or were reckless in not knowing that BCC would not do the transaction with Great Northern if it was aware of the true facts,” John McVeigh, a Portland attorney representing BCC, wrote in the lawsuit.

“The owners knew or were reckless in not knowing that Great Northern and the directors could only conclude the transaction with BCC by furnishing false and misleading statements to BCC, by concealing the true facts and by omitting to disclose material facts,” McVeigh wrote. “As a direct and proximate result of defendants’ conduct, BCC has suffered millions of dollars in damages, including loss of money and loss of profits, which BCC seeks to recover in this action.”

BCC hopes to recover its losses through the lawsuit.

The owners named in the lawsuit are Lambert Bedard and Joseph Kass, both of Quebec, and Mendel Schwimmer of New York City. In April 1999, Bedard and Kass formed Inexcon Maine, a holding company, for the purpose of buying Great Northern from Bowater Inc. Schwimmer was a 10 percent owner. Bedard was Great Northern’s chief executive officer.

The directors named in the lawsuit are Timothy Morgan of Wisconsin, who was Great Northern’s chief financial officer; Harold Gordon of Rhode Island, who became president of Great Northern’s board of directors; and Benoit Michel and John Kelsall, both of Quebec.

Also named are Eldon Doody, former mill manager, and Robert Leathers, who was the employee representative on the board of directors.

Portland attorney Nicholas Walsh, who represents Bedard and Inexcon Maine, said Wednesday evening that he had not seen the lawsuit and could not comment on it.

“It sounds like a desperate grab for the officers’ and directors’ insurance money,” Walsh said.

Bedard and the other owners and directors are covered under a multimillion-dollar insurance policy that would cover them if they are accused of mismanagement.

BCC has stated in U.S. Bankruptcy Court hearings that it still is owed more than $10 million.

In the lawsuit filed Wednesday, BCC claims that when it undertook loan negotiations with Great Northern in March 2002, it never was told that the company’s owners and board of directors had agreed just the year before to transfer properties, including the Dolby Landfill, to Inexcon Maine and Bedard. The parent company and Bedard used the properties as collateral to secure loans from Katahdin Federal Credit Union in Millinocket to then funnel into Great Northern’s operations.

BCC agreed to buy all of Great Northern’s assets for $50 million and lease the equipment back to Great Northern, believing that if the paper company had trouble paying its lease, BCC could claim the collateral and run the business if it wanted to do so.

But when Great Northern transferred the properties in late spring 2001, the company already was operating under terms of a $50 million revolving loan it had secured months earlier from Congress Financial Corp. Those terms stated that Great Northern could not transfer any of its properties, which were collateral for the loan, to any other company, and that it could not obtain any loans from any other lenders, according to the BCC lawsuit.

To complete the deal, BCC and Congress agreed to terms, according to the lawsuit, but both lenders were not aware of the land transfers and the Katahdin Federal loans. Great Northern also was close to defaulting on Congress’ loan, the lawsuit stated.

Also, BCC claims in the lawsuit that Great Northern never recorded the property transfers on its financial statements. BCC stated, too, that Great Northern continued to use the Dolby Landfill even though ownership of the property was transferred to Inexcon Maine. According to state law, the landfill’s license was not transferable.

“Had Great Northern’s officers disclosed these transfers, BCC would have learned about the scheme used to obtain secret financing from KFCU in violation of the Congress loan agreement and not entered into the sale and leaseback transaction with Great Northern,” McVeigh wrote.

Katahdin Federal still is owed more than $3 million on three loans.

Last March, a federal bankruptcy judge ordered that the properties be returned to Great Northern so that a sale of the mills could be completed. A trial is set to begin March 1 to determine how much the credit union should be paid on the loans. Katahdin Federal has stated it is entitled to the full amount because the loans were secured with the properties, but BCC believes the credit union is entitled to less than $1 million, what it claims the properties are worth.

Attempts to locate most of the directors were unsuccessful Wednesday evening.

Doody and Leathers said they were made aware of the lawsuit when called by the Bangor Daily News for comment.

“It would really be inappropriate for me to discuss this because I have to talk with other people first,” Doody said Wednesday night.

Leathers, who lost his job when Great Northern was shut down last December and is participating in a job retraining program, said he hasn’t been served the lawsuit, but that he had heard rumors a lawsuit was likely. He said he just didn’t know that he would be part of the lawsuit.

“I’m not in the loop. I don’t know what’s going on,” Leathers said. “I’m going to school just like everybody else to try to get a job.”

Leathers, who is not represented by an attorney yet, was on Great Northern’s board for only a couple of months when the property transfers were voted on. He said that last week he was questioned by attorneys for BCC and Katahdin Federal for the March trial on what he knew about the actions of Great Northern’s board of directors. He said he asked several attorneys involved in the case whether he should have an attorney, and did not get any response.

“I don’t know if it was an official deposition,” Leathers said. “They asked me questions and I answered them.”

Leathers said he remembers that during one board meeting, when the company’s dire financial situation was discussed, “that was a very hard meeting for all of us and me in particular.”

“I could not actually remember transferring the property,” he added.

But during last week’s questioning, minutes of the board meetings that list the property transfers on them were shown to him, Leathers said.

“I saw it in writing so it had to have happened,” he said.

Leathers said he would describe his role on the board as one where he was trying to keep himself and his co-workers employed.

“I tried to help out the company and keep jobs,” Leathers said.