Volume 2, Number 22 - August 29, 2002
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Wind River Resort subject to lawsuit
Gayle Kinnison filed a lawsuit last Friday against Stuart Thompson and his business partners, and the outcome of the case could determine who controls the fate of the White Pine Ski Area and Resort: Thompson and his associates, or Kinnison.
The lawsuit was filed against Thompson; Stanley and Claire Birge; Max Lundberg, Wind River Resorts (which owns and holds the permit for the ski resort near Pinedale); WRR Equipment Corporation; Logcrafters, Inc. (owned by Thompson), and Five Seven Bar Ranching Company Inc. (also owned by Thompson).
According to the complaint filed in Ninth Judicial District Court, at all times relevant to the lawsuit Wind River Resorts was controlled by the Birges, a husband and wife from Missouri, and Thompson.
Wind River Resorts resolved to build the White Pine Ski Area, with Thompson in control of construction, and with part of the work conducted in the name of his two other companies: Logcrafters and Five Seven Bar Ranching Company, according to the complaint. The complaint stated: "Thompson worked without any corporate oversight or supervision and without any contractual limits on his profit or expenses," which allegedly totaled nearly $150,000, charged to Wind River Resorts in 1999.
"The ski area operated during the 1999/2000 season at a loss," the complaint alleged. "In the summer of 2000, the corporation was insolvent, had unpaid creditors, was without income to pay loans or to complete construction of the ski area, including the lodge. The prospect for the Birges and Thompson was to lose everything unless they could find a new investor.
"In the summer of 2000, the Birges and Thompson told Ms. Kinnison that Wind River Resorts needed $470,127 to stay in business and needed a new maintenance building estimated to cost $60,000," the complaint stated.
Although the Birges and Thompson had allegedly taken large shares of stock in the company at $3 per share, they offered Kinnison stock represented to have a market value of $4.99 per share, while estimating that the U.S. Forest Service special-use permit for the resort had a value of $3 million, according to the complaint.
Motivated by a desire to see the ski area succeed for the local community, and relying upon representations made by the Birges, Kinnison allegedly agreed to purchase the stock on the condition that the purchase price be used to complete construction on the lodge. By late January 2001, Kinnison had reportedly contributed $447,384 for corporate stock.
According to the complaint, with Thompson still in control, lodge construction continued with his profits for the year 2000 totaling $194,335 and the ski area operating at an "enormous loss" during the 2000/2001 ski season, allegedly "due to self-dealing, overcharges and mismanagement by Thompson."
By the summer, the corporation was again unable to meet its obligations, according to the complaint, and Birge asked Kinnison for more money. Kinnison reportedly negotiated an agreement in which most of Thompson's management and control of the corporation would end, "but as a face-saving device," he would remain as president of the corporation with no real authority. Max Lundberg reportedly was appointed vice-president and chief operating officer and granted supervision and control of daily business affairs of the corporation and Dave Bell was appointed to the corporation's board "to give Bell a vote to break a tie between Birge and Thompson," according to the document filed in court.
Also under that agreement, Kinnison would purchase $550,000 of Wind River Resort stock in three installments while Thompson would invest $200,000 in stock and Wind River Resorts itself would pay up to $140,000 of outstanding accounts payable to Logcrafters and Five Seven Bar Ranching Company. Additional capital of up to $400,000 would be made available to WRR Equipment Corporation by the Birges.
"After getting Ms. Kinnison's money, much of which went to Thompson, Thompson began an effort to regain control of the corporation with defendant Lundberg acting as his confederate and agent," the complaint alleges. "This plan took many forms, including disruption of operations, unauthorized contacts with employees, demanding payment of excessive bills, entering into unauthorized transactions on behalf of the corporation and contending that Bell's election to the board of directors was invalid."
The Birges and Thompson did not comply with their agreement with Kinnison, the complaint alleges, and Lundberg took actions designed to appease Thompson, leaving Thompson "still in charge and running the corporation."
The complaint alleges that the Birges and Lundberg were in a league with Thompson while maintaining they were working to rid the corporation of his influences.
The complaint alleges serious construction defects in the White Pine Lodge were discovered by January 2002 and reported to Birge, who alleged refused to take the action necessary to pursue remedies from Thompson.
In February this year, Bell and board member Karla Holloway, "who had consistently sounded the alarm," resigned from the corporation's board.
"Now, as always, the corporation is controlled by Thompson and the Birges," the complaint stated. "The only thing that changed is that they got $847,384 of Ms. Kinnison's money."
The complaint seeks to have all Kinnison's capital contributions returned to her, with interest; have personal liability imposed upon Thompson and the Birges for the money due to Kinnison; for the court to order damages for breach of contract; and other remedies.
Kinnison claims that Thompson and the Birges, through their various companies, and with the knowledge and consent of one another, "have engaged in a pattern and course of self-dealing which constitutes a breach of loyalty and fiduciary duty to the corporation and its minority and non-voting shareholders."
Because these "wrongdoers" are in control of the corporation, "it is not possible for them to objectively, without a conflict of interest and self-dealing, authorize and direct the corporation to take the action necessary ... ," the documents allege.
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