For months, Joel Davis, the owner of Central Maine Meats, tried to get a clear picture of the finances of the Gardiner-based company he had started with William Lovely in 2015.

What Davis alleges he found were longstanding fraudulent dealings by Lovely against him, according to a civil lawsuit filed Monday in Augusta District Court. Lovely took money out of the company in several ways, using company resources as collateral for loans taken out on his behalf and on behalf of his construction company when that collateral already covered other loans, the lawsuit alleges.

Davis also alleges that Lovely has claimed equipment owned by Central Maine Meats as his personal property, withheld critical information and transferred, by means of a quitclaim deed, property occupied by the meat business to his own construction company that he previously pledged to Davis as collateral for loans totaling more than $450,000 that Davis had made to the company.

Central Maine Meats owner Joel Davis says co-founder William Lovely engaged in fraudulent practices.

Davis is seeking a judgment of $1.9 million plus damages from Lovely and Lovely’s construction company, A.B.J. General Contractor Inc.

The suit comes just over a month after Central Maine Meats, under Davis’ ownership, sought bankruptcy protection under Chapter 12, which allows farming and fishing businesses to reorganize and craft a plan to pay back creditors over a relatively short period of time.

The bankruptcy and lawsuit reveal deep fractures in a partnership that was one of the mainstays of Gardiner’s food hub strategy, which focused on attracting food producers to the city and promoting them.

On Monday, Lovely said he was unaware the suit had been filed.

“I can only tell you that I am 100 percent not aware of it, and I am 100 percent not a bit surprised,” Lovely said.

Davis said Monday the claims in the suit speak for themselves.

Central Maine Meats is the only USDA-inspected slaughterhouse in Maine, which means its meat can be sold out of state.

Davis and Lovely opened Central Maine Meats in 2015, with Davis as majority owner and Lovely as minority owner.

Two years earlier, Lovely, with a different partner, opened Northeast Meats. At the time, Lovely owned the processing plant building and property with his wife and leased it to Northeast Meats. The Lovelys were also company shareholders.

When Central Maine Meats started, Davis said in his lawsuit, it was with the understanding that the business would not take on the debts of Northeast Meats, and that Northeast Meats’ equipment would be Lovely’s capital contribution to the new company.

As the company took off and expanded both near the company’s Brunswick Avenue facility and at the Libby Hill Business Park, Davis said in his lawsuit, Lovely was in charge of the day-to-day operations and Davis worked to secure contracts.

Some of the company’s accomplishments were detailed publicly.

Central Maine Meats secured $1.3 million in grants from the Community Development Block Grant program for both economic development and job creation, and the company satisfied the requirements for those grants.

In 2016, USDA Rural Development announced a $2.6 million loan guarantee package in partnership with Machias Savings Bank to allow Lovely and his wife to refinance debt and provide working capital.

In the months afterward, the company aggressively expanded its capabilities, adding a flash freezer, a smoker and branching out into the specialized area of halal slaughter for the state’s growing Muslim population.

Davis’ lawsuit details claims that include breach of contract, breach of duty as a member of a limited liability company, unjust enrichment, interference with an advantageous business opportunity, negligent misrepresentation and fraud.

Davis claims that Lovely and his wife as landlords, and Lovely and Central Maine Meats as tenants, paid $30,000 monthly in five different lease payments from the business without Davis’ knowledge, and that Lovely and his company borrowed money from Central Maine Meats, but never repaid it.

According to the lawsuit, Davis notified Lovely on March 26 that Lovely’s shares in the company had been transferred to Davis under the terms of the company’s unit pledge agreement, and Lovely’s interest in the company was terminated.

Two days later, the lawsuit states, Lovely transferred ownership of the property at 563 Brunswick Ave. to his construction company and used it to secure a loan for $600,000, and transferred all the equipment and fixtures in the building to his company, without disclosing to Coastal Realty Capital the demand note and security agreement executed with Davis in 2017 or the 2015 Coastal Enterprises Inc. security agreement and loans. According to the lawsuit, that property is collateral for Davis’s loans.

The lawsuit claims Lovely declined to use any of the borrowed money to pay his 40 percent share of the debt to the company or repay loans Davis made to the company and Lovely.

In mid-April, Central Maine Meats filed for bankruptcy protection.

 


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