Local contractors targeted by GT Advanced Technologies lawsuits
Company seeks return of money spent on Merrimack facility’s expansion
GT Advanced Technologies Inc. is suing local construction contractors for hundreds of thousands of dollars and might sue its former officers as well in an attempt to collect a bit more money to distribute to other creditors.
While the Merrimack-based advanced materials firm, which emerged from bankruptcy reorganization in March, is back in business, legal proceedings are far from over.
GTAT, which went public as GT Solar Technologies in 2008, filed for bankruptcy in October 2014 after its deal to produce sapphire for the screens of Apple’s mobile devices fell apart, leaving it with over $1.3 billion in debt and filing the second-largest bankruptcy in state history.
But thanks to repeated financing deals, the company is not out of money. Indeed, in April, according to the first quarterly report filed at the end of August, the company had nearly $65 million on hand.
The company used some of that money to hire a “litigation trustee” – former board member Eugene Davis – that is now considering suing the company’s former directors and officers for making the Apple deal, which turned out to be disastrous in hindsight.
In July, Davis sought to question two former GTAT employees, Christine Richardson, former vice president, crystal growth systems development and engineering, and Paul Matthews, former product manager. David told the court that both appeared to be “directly involved in GTAT due diligence and performance” of the Apple deal.
The bankruptcy court granted the request, ordering the two to submit to questioning in August, but there was no record in the court documents showing that it occurred.
Davis has until October 6 to file civil charges on the matter. Attempts to reach Davis’s attorney and the two employees were unsuccessful.
New Hampshire contractors
Some former GTAT officials are also the target of a class action suit, along with Apple, that that has been in limbo since March.
That suit alleges that former GTAT CEO Thomas Gutierrez and other executives reassured investors that the deal with Apple was working out when it was actually falling apart.
There are also federal and state investigations into the matters, which may be holding up the civil court proceedings.
The court suit is the only hope for former shareholders to recover anything from GTAT’s collapse, since they will not receive anything under the reorganization.
The estate is starting to try to recover some of the money by suing contractors who were paid some of what they were owed for construction work finished shortly before the bankruptcy filing.
For instance, in addition to suing Granite State Plumbing & Heating to dismiss claims of $359,000, of which $331,000 was secured by a mechanic lien. GTAT argues that the lien was not perfected. In addition, it is suing the Weare plumbing contractor for the $637,000 that was collected before GTAT went under.
Other New Hampshire companies being sued are Decco Inc., Brookline, ($77,500 lien and $150,000) and Metro Walls Inc. ($41,000 lien).
‘Got our attention’
The largest of the suits so far was filed against Interstate Electric Services, based in Billerica, Mass., to dismiss $402,000 in claims, $271,500 secured by liens, to get back the $798,000 was paid 90 days before the bankruptcy filing.
“That got our attention,” said James P. Alibrandi, Interstate Electrical’s president.
Alibrandi said that the company was sure it would prevail in court, since such litigation is aimed at “preferential transfers” – payments made to insiders or associates when the company knew it was going under. But these payments were just regular payments made for work on the expansion of the Merrimack headquarters, the same kind of work Interstate had been doing for GTAT for a decade.
“This company’s decisions caught many people off guard,” said Alibrandi. “It was tragic for their employees and for tradespeople who were caught up with their projects.”
The suits were filed by GTAT in June, but they are just the tip of the iceberg.
In late July, GTAT, said it “anticipates filing potentially hundreds of avoidance actions” within the next two months. To cut down on the expense of all these actions, the company proposed mandatory mediation, to take place in Manchester, Boston or New York, with the other party paying a fee – ranging from $1,000 to $3,000, depending on the size of the claim.
The potential targets of such suits objected. So did the bankruptcy trustee (not to be confused with the litigation trustee) who criticized a “one-size-fits-all approach” that “would limit the defendant’s rights.”
On Tuesday, GTAT filed another suit against a local company, Eastern Vent Systems of Pelham for an over $107,000 lien.