The current owner of Aacer Flooring (Peshtigo, Wis.) and Wolf River Lumber Inc. (New London, Wis.) has reached a tentative settlement in a $20 million civil lawsuit brought against Gary Ort, who was a co-owner of the two wood products companies prior to their filing for receivership in March 2010. On Oct.8, an attorney for the plaintiff, GreenStone Farm Credit Services, filed documents with the U.S. District Court in Green Bay, Wis., indicating the two parties had reached a tentative settlement, the amount for which was not specified.
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The current owner of Aacer Flooring (Peshtigo, Wis.) and Wolf River Lumber Inc. (New London, Wis.) has reached a tentative settlement in a $20 million civil lawsuit brought against Gary Ort, who was a co-owner of the two wood products companies prior to their filing for receivership in March 2010. On Oct.8, an attorney for the plaintiff, GreenStone Farm Credit Services, filed documents with the U.S. District Court in Green Bay, Wis., indicating the two parties had reached a tentative settlement, the amount for which was not specified.
Through two specially established LLCs, East Lansing, Mich.-based GreenStone purchased Aacer and Wolf River in June 2010 at auction. In December 2010, GreenStone filed the civil lawsuit, accusing Ort of diverting some $20 million away from Aacer and Wolf River and channeling the money to himself, family and friends. While Ort served as the focus of court proceedings, his wife Cynthia Ort as well as Kari Ort-Bunting, Ort's daughter who previously served as VP of operations at Wolf River, were listed as co-defendants on the complaint.
GreenStone alleged that to steal the $20 million, Ort broke contracts and committed fraud. "Ort essentially treated his companies as a personal piggy bank," U.S. District Court Judge William C. Griesbach wrote in court documents.The court proceedings were highlighted by "a litany of allegations of stonewalling, foot-dragging and outright lying on the part of the defendants, particularly Gary Ort," Griesbach wrote.
Court documents from both GreenStone and Griesbach outline dozens of breach-of-contract and fraud allegations perpetrated by Ort and his co-defendants. Among them, while in charge of Wolf River Lumber, Ort received payments of $2.97 million in the form of "advances" that he never repaid and later attempted to explain away as consulting fees. Considering statutory interest, a forensic accountant determined this amount was closer to $4 million. There was also about $3.5 million in timber that was taken from land belonging to Wolf River for which it was never re-paid, resulting in loss of collateral and damage to GreenStone.
Another instance includes both Wolf River and Aacer overpaying for lumber purchased from a company of Ort's named "Northern Components." By comparing several months of lumber prices paid by Aacer and Wolf River with prices published in the "Hardwood Market Report," the forensic accountant determined that Ort overcharged them about $1.6 million. Further, in trying to explain the overcharge, Griesbach wrote, Ort "asserted that sometimes it was worth paying 'above market' prices if the quality was particularly good, as he claimed Northern Components' was." However, testimony clearly showed that Northern Components' lumber quality was "not of superior quality, and in fact it was of a lower quality altogether," Griesbach wrote. During court proceedings, it was determined that Northern Components' wood was "dead last" in quality when compared with Aacer's other suppliers.
In another example, Griesbach explained how Ort sold a $750,000 promissory note, which he had previously assigned to GreenStone, to an unnamed business partner for "only $60,000." When asked about this note, Ort declined to provide documentation of the transaction.
Further, Griesbach detailed how Ort overpaid for a $84,000 ripsaw in 2003 and then turned around and leased it to Wolf River for $48,000 per year, "paying more than half the purchase price each year," Griesbach wrote. In total, Wolf River overpaid between $169,000 and $221,000 to lease it-"and that assumes Wolf River even needed a ripsaw in the first place," Griesbach wrote.
Similarly, Ort was unable or unwilling to provide documentation explaining some $135,000 in "loan repayments" from Northern Premium Hardwoods (NPH), which is owned by what Judge Griesbach labels Ort's "longtime friend Timothy Flaherty." Ort did not have any details about how much the loans were for or their terms, and later Flaherty testified the money was for "consulting fees" Ort earned on a monthly basis. The consulting arrangement was not put in writing until soon before Flaherty's deposition. Judge Griesbach wrote, "The business arrangement between the parties becomes stranger still: Not only did NPH not loan any money to Ort, Flaherty testified at one point Ort's wife Cynthia loaned his company $200,000." What's more, "NPH paid Cynthia Ort some $6,000 per month for 'office space,' a figure four times what the mortgage on an entire house in New London[Ort's residence] would cost." Stranger still, NPH is based in Racine, Wis., some 150 miles from the office space at Ort's home, and the "only things stored in this expensive 'office' were various unspecified invoices of NPH," Griesbach wrote.
In another instance, Griesbach described how Ort used NPH to shield assets "through a number of undocumented oral arrangements … And these could merely be the tip of the proverbial iceberg." He continued, "… Ort has repeatedly lied about his relationship with NPH. One day he would say he received a given amount from NPH as 'commissions' or for 'consulting,' and another day he would testify that the money he received (which would be a different total) was for repayments on undocumented loans."
In the original complaint, GreenStone alleged that Kari Bunting was given about $1.1 million in salary bonuses and profit sharing payments that were unjustified and in excess of market value. Also, it was alleged that Ort charged about $290,000 in personal credit card expenses-for travel, groceries, memberships and political donations-to Aacer and Wolf River. And there were payments in excess of $500,000 for reimbursing Ort's family for income taxes and life insurance.
"… This case has all the earmarks of fraud," Griesbach wrote. Brought up in court were "undocumented and unexplained loans for large sums among parties at less than arms' length." It was even alleged that Ort maintained bank accounts in the Cayman Islands, "where Ort denied visiting but later admitted he had visited as recently as 2008."
As proceedings went on, Ort began defending himself, writing and filing his own legal documents with the court. In an appeal document Ort filed on Sept. 12, he listed a 2009 Chevy Impala valued at $10,000; an unspecified 2000-year-model vehicle valued at $1,500; and a 401(k) plan of an unspecified value as his only property. In its original complaint, GreenStone alleged that Ort's indebtedness to it may be satisfied in whole or in part from his and Cynthia's marital property.
In court documents, Ort wrote that he is no longer affiliated with Aacer nor Wolf River. Reached via email, Ort indicated he would comment on details of the settlement in about 30 days.
In his letter to Judge Greisbach on Monday, Andrew Clarkowski, counsel for GreenStone, said all claims will be resolved in the settlement after it is finalized over the next several weeks. When reached for comment on Wednesday, Clarkowski declined to provide further details of the settlement.
According to Hardwood magazine, the Ort family purchased Wolf River in 1982, and the family purchased Aacer in 1998. By that time, the Ort family controlled 75,000 acres and four sawmills producing 32 million board feet per year.