VEAZIE, Maine — The U.S. Department of Labor is suing a Pennsylvania man for his role in the downfall of Gagne Precast Concrete Products Inc., which was forced out of operation by creditors in May 2008.
A complaint filed last month in U.S. District Court for the Middle District of Pennsylvania alleges that Stephen Thomas of York, Pa., falsely inflated the value of the Veazie company before he purchased it on credit and then illegally siphoned away more than $1.1 million during his three years as its president.
Thomas purchased the company with a leveraged buyout in 2005 that included the creation of an employee stock ownership plan. Gagne Precast Concrete, formerly owned by Fred Gagne, had 48 employees at the time. Thomas is accused by the Labor Department of using outdated and inaccurate information that caused the stock’s value to appear larger than it was. The stock was purchased with $3.9 million in loans and distributed to the employees.
Between his purchase of the company and May 2008, Thomas stole $1.1 million by authorizing inflated payments to two other businesses he owned; making improper cash withdrawals from Gagne’s corporate accounts; intercepting checks made payable to Gagne Concrete; and authorizing too much pay for himself through the company’s payroll system, according to the Labor Department complaint.
In 2006, Thomas refinanced his various loans with Bangor Savings Bank, which extended a line of credit of $5.5 million, according to the complaint. On May 29, 2008, the bank seized Gagne’s assets in an attempt to recover $5 million it was owed. By the end of the day, the company’s Veazie operations were locked down and Gagne Precast Concrete Products, which had been in business since 1981, had ceased to exist. Between 15 and 25 people lost their jobs that day, according to the Bangor Daily News archives.
According to Labor Department spokesman John Chavez, in addition to their jobs the employees likely lost whatever their stock would have been worth.
“If the company could not meet its loan obligations with the bank, that’s sure how it sounds,” said Chavez. “The bank foreclosed on the company and liquidated its assets.”
Chavez said he doesn’t know what the next step in the suit will be because the Labor Department is unable to locate Thomas.
“We’re not sure where he is,” said Chavez.
There was no answer or opportunity to leave a message at a number listed for Thomas in York, Pa. Former officials with Gagne Concrete could not be reached and a spokesman for Bangor Savings Bank did not return a call.
The suit against Thomas seeks restitution for the losses incurred by Gagne employees through the stock ownership plan and would bar Thomas from ever again serving as a fiduciary or service provider for a benefit plan sanctioned by the federal Employee Retirement Income Security Act.