Gainey under oath in bankruptcy case

GRAND RAPIDS, Mich. (WOOD) - Harvey Gainey was questioned under oath Monday as bankruptcy proceedings for Gainey Corp. and five related companies he owns continued.

Gainey said the roughly 2,100 workers employed by Gainey and the other firms filing for Chapter 11 protection have been paid. He also said accusations that 293 of the company's trailers were missing was based on bad information from a consultant hired by Wachovia Bank.

"They were wrong," he said. That issue and others led a federal bankruptcy judge to appoint an outside expert last week to examine Gainey Corp.'s financial situation.

An attorney for the corporation said he was assembling documents to resolve the "missing" trailer issue.

Gainey Corp., along with Gainey Transportation Services, Inc.; Super Service, Inc., LCT Transportation Services, Inc.; Freight Brokers of America and Gainey Insurance Services filed for Chapter 11 bankruptcy protection in late October.

Gainey and his chief financial officer said Monday that decision was prompted by Wachovia's move to take control of cash the corporation was using to operate.

Wachovia filed suit against Gainey in early October, alleging the company owed the bank more than $230 million. Gainey said Monday he believes the firms have a combined worth of between $180 and $190 million.

Further hearings in the bankruptcy case are set for Tuesday. A judge will hear Wachovia's objections to paying Harvey Gainey more than $600,000 per year. An earlier ruling granted Gainey a salary of roughly $170,000.

The bank also objects to paying Carl Oosterhouse, the recently-named chief operating officer, on the basis that Oosterhouse should not be paid as an employee, but rather as a professional contracted to assist the firm. Gainey said Monday that the decision to hire Oosterhouse as an employee was made in part because it would be less expensive than paying him as a consultant under contract.

Another critical hearing in the case is expected to take place in January. The federal bankruptcy judge in the case is expected to make a final ruling on whether Gainey Corp. can continue to use its cash to run the business. Wachovia and other creditors claim the cash is theirs.