14 Mar

$68,000 to be Paid in Family Battle

Insurer settles in Gardners’ bitter dispute.

Milwaukee Journal Sentinel
By Rick Romell

An insurance company will pay Northern Rail Car Corp. $68,000 to settle a claim arising from the alleged actions of former company president Daniel J. Gardner. The development comes amid a bitter dispute between Gardner and his father, William E. Gardner, who owned Northern and is chief executive and majority owner of the Wisconsin & Southern Railroad Co.

The Gardners are waging a legal battle in federal court. The son accuses his father of reneging on a deal to transfer ownership of Northern and a large piece of industrial real estate to him. The father denies there was such a deal, and he accuses his son of trying to take the company and the real estate by fraud.

The insurance settlement, however, is in a different case – Northern’s receivership action, which is winding down in Milwaukee County Circuit Court. Northern voluntarily entered receivership, a state proceeding similar to bankruptcy, in September 2001 amid mounting financial problems.

Northern, which repaired and restored railroad cars, is now out of business. Receiver Michael S. Polsky has been liquidating the firm’s assets to raise money for creditors.

In a motion, Polsky said Northern filed a claim for $202,778 with its insurance carrier, the Chubb Group, “as the result of Daniel Gardner’s actions.”

Polsky would not say what those actions were. William Gardner declined to discuss the case.

Daniel Gardner – who opposed the insurance settlement – denied any wrongdoing. He said his father was trying “to smear mud on me.”

According to Polsky’s motion:

After hiring an accounting firm to audit Northern’s claimed loss, Chubb disallowed much of it but offered the company $63,541 to settle.

Northern – overseen by Polsky – then hired an accountant who was “a certified fraud examiner and has extensive experience analyzing this type of claim.” After auditing Northern’s documentation, the accountant substantiated a claim for $73,161. Chubb agreed to pay that, minus a $5,000 deductible.

Daniel Gardner’s attorney, Jeffrey L. Solomon, of Garden City, N.Y., filed an objection Friday to the proposed settlement.

Solomon’s motion says Gardner’s father initially filed a “grossly inflated and possibly fraudulent claim with Chubb,” and that in the federal lawsuit he had been “unwilling or unable” to document any wrongdoing by his son.

In his federal suit, Daniel Gardner alleges his father falsely told some 75 people via e-mail that Daniel had stolen $20,000 from Northern and misappropriated other company money.

Daniel Gardner said in an interview that he had asked his father repeatedly for documentation of any alleged theft, but that his father “has refused to provide me with anything.”

William Gardner has denied slandering his son.

Solomon’s motion in the receivership argued that the issue of Daniel Gardner’s misconduct, if any, would be considered in the federal case, so the circuit court should either refuse to approve the insurance settlement or place the money in escrow while the federal action was pending.

But Circuit Judge Dennis P. Moroney approved the settlement last week, noting that Daniel Gardner’s attorneys hadn’t formally petitioned for permission to be heard in Wisconsin as out-of-state lawyers.

Solomon said there hadn’t been time to do that because he first heard of the settlement motion late last week.

Expert’s Note: The amended claim of $73,161 does not imply that the original claim was fraudulent. The claimant notes that certain items on Northern Rail Car’s books were considered irregular, but may not have qualified for reimbursement under the terms of the insurance policy.

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