Report: Gainey owes millions to corp.

GRAND RAPIDS, Mich. (WOOD) - West Michigan trucking giant Gainey Corporation should be repaid more than $3 million in loans given to founder Harvey Gainey Sr. and his son Harvey "Buddy" Gainey III, a newly-unsealed bankruptcy report contends.

The loans include an undated, zero-interest $2.1 million loan to Gainey Sr. and have no documented business purpose, according to the report, prepared for a committee of Gainey Corp.'s unsecured creditors.

The committee represents non-bank entities owed money by the corporation.

Gainey Corp. filed for Chapter 11 bankruptcy protection last fall after a Wachovia Bank-led lending group -- the secured creditors -- took the trucking firm to court, claiming it was owed more than $200 million.

The unsecured creditors committee's report states the committee has "no reason" to believe Gainey Sr. cannot repay the money. He filed a 2008 financial statement with the committee claiming he had a negative net worth of $5.5 million, but the committee obtained another statement in which Gainey Sr. claimed he had a positive net worth of $5.7 million.

He claimed the different conclusions depend on whether Gainey Corp.'s reorganization is successful, but accountants for the committee said there is no evidence to support that.

The accountants said the differences included income of $1.3 million that was not reported in the negative net worth statement and a dramatically different valuation of Gainey Sr.'s roughly 20 percent share of Northpointe Bank.

Reached by phone Thursday, Gainey Sr. told 24 Hour News 8's Suzanne Geha he had no comment on the unsealed report, but said a buyout deal involving Arizona private equity firm Najafi Companies could be finalized "in a short period of time." The deal is being discussed by the corporation, Najafi and the Wachovia-led lending group. Details could emerge at a federal bankruptcy court hearing August 6.

The unsecured creditors committee is not a part of those talks, Gainey Sr. said.

The committee's report also claims Gainey Sr. has been unwilling to surrender a private aircraft leased by the company. If the plane is surrendered, Key Equipment Finance would waive a claim that it is owed $1 million for the lease, the report stated.

And the qualifications of Gainey Corp. Chief Operating Officer Carl Oosterhouse, the man who would become the sole shareholder of a new Gainey Corp. under the current reorganization plan, remain "in question," the creditors committee contends. The report claimed records of exactly what Oosterhouse does for the company "do not include adequate detail."

Oosterhouse, who helped incorporate the company and later served as legal counsel, resigned in 2006 after misappropriating funds from the law firm that employed him as well as approximately $27,000 from Gainey Corp.

He was brought in as legal counsel again in July 2008, and, after his disbarment later that month, the corporation hired Oosterhouse back as a consultant. When Gainey Corp. filed for Chapter 11 protection, Oosterhouse was named chief operating officer.

In January, there was discussion between the committee and the corporation about conducting a search for a chief operating officer, to measure candidates' qualifications against those of Oosterhouse. Gainey Corp. told the committee it has not and does not intend to conduct such a search.

The committee also agreed with an earlier outside report, concluding that the $2.04 million paid to Gainey Sr. in 2007 and $1.02 million in 2008 was "excessive" given that the corporation lost in excess of $28 million in 2007.

Gainey Sr. said Thursday that the Wachovia-led lending group viewed the buyout deal with Najafi favorably. The deal would include all the Gainey entities that are part of the Chapter 11 filings, he said. And Gainey Sr. is negotiating with the investor for both he and Oosterhouse to remain "involved" with the company.