Judge: Can't OK Gainey sale yet

GRAND RAPIDS, Mich. (WOOD) - A federal bankruptcy judge said Wednesday he could not yet sign off on a $105 million deal to sell most of West Michigan trucking giant Gainey Corp., arguing that the sale deal gives too many benefits to "insiders" such as founder Harvey Gainey Sr. and Carl Oosterhouse, the firm's chief operating officer.

"It's like a 'Monopoly' free pass for insiders," Judge James Gregg said of the deal.

The plan would sell most all the assets of Gainey Corp. and certain related companies, which all filed for Chapter 11 bankruptcy protection last October to a new firm, Gainey Transportation LLC, with an Arizona-based private equity firm as a major investor.

Gainey Sr. told 24 Hour News 8 earlier this month the deal would mean all the trucking company's employees -- including Oosterhouse and himself -- would keep their jobs.

In criticizing the deal, Gregg specifically cited a provision that would release insiders of any obligation to pay back money owed to the company -- after transferring those claims from the old corporation to the new. That would include more than $3 million the corporation loaned Gainey Sr. and his son. A report prepared for Gainey Corp.'s unsecured creditors said it could not find any business purpose for the loans.

Gainey Sr., in an interview with 24 Hour News 8's Suzanne Geha on Wednesday, said it would be up to the new owner to decide whether the loans are paid back, but a sale document filed with bankruptcy court states that "upon closing of the sale transaction, (new investor) Najafi will cause Purchaser to release and fully discharge any and all such Insider Claims."

In court Wednesday, the judge also raised questions about who negotiated the sale deal on behalf of the corporation -- because the interests of "insiders" are not necessarily those of the company or the bankruptcy estate. Gainey Sr. maintained Wednesday that it was Najafi that wanted to keep Gainey Sr. and Oosterhouse in place, not the other way around. In prior interviews, Gainey Sr. said he would own 20 percent of the new company and Najafi would own the remaining 80 percent.

When asked directly if he required to be kept on at the company, Gainey Sr. said: "Absolutely not. I'm 66 years old and ready to go to Florida."

Gregg said Wednesday morning he still could sign off on the deal later in the day if the parties come to an agreement that resolves his concerns about insider benefits. After hours of meetings Wednesday morning, no agreement had been reached. Gregg told the parties that if a settlement was agreed to Wednesday afternoon, he would hold a hearing on the matter Thursday morning.

If no settlement is reached, more hearings in the case have been scheduled for early September.