The Minneapolis Star
Electric Vehicle Corp., a Twin Cities company charged last week with consumer fraud by the Minnesota attorney general's office, entered U.S. Bankruptcy Court late last week with more than $2.5 million in debts owed to more than 300 individuals and corporations.
The bankruptcy court action, filed under Chapter 11, could ultimately pin losses on 100 consumers across the nation who paid up to $24,000 for cars, marketed under the Bradley GT nameplate, that were never delivered.
Consumers and employees of the company report that the cars and unassembled car kits that were shipped often lacked key components and had substantial deficiencies, such as missing windows and doors that wouldn't close.
Moreover, most of Electric Vehicle's customers bought cars based on a sales promotion that the attorney general's office charges was deceptive and fraudulent.
At the center of the controversy is Deil Gustafson, the Minneapolis businessman who was under federal investigation earlier this year for his deals involving a Las Vegas gambling casino allegedly controlled by organized crime figures. Gustafson was found in violation of federal securities laws, although he was denied any links to organized crime.
Gustafson is listed in Federal Reserve Bank documents as owner of 50 percent of Electric Vehicle and as part owner of Thor Corp. and GCI Inc., both of which are closely related to Electric Vehicle and the subjects of a series of lawsuits.
Both Electric Vehicle and Thor Corp. produced various models of Bradley cars, consisting of fiberglass bodies mounted on Volkswagen chassis and powered by either electric motors or gasoline engines. Thor did business as Bradley Automotive, 14414 N. 21st Ave., Plymouth.
Gustafson, in addition to being listed in documents as a director and officer of Electric Vehicle, is indirectly a creditor, as well. Two of Gustafson's financial companies, Summit Development Corp. and Summit Mortgage, have combined loans of $255,755.84 to Electric Vehicle, which are secured by all the assets of the company.
That could mean that Gustafson would have rights in bankruptcy court proceedings to any inventory, physical property of money in Electric Vehicle's treasury before the people who paid for cars that were never delivered.
The other 50 percent of Electric Vehicle is owned by Gary Courneya, a former Beverly Hills sports car salesman.
Gustafson and Courneya reportedly became partners in late 1980, when Gustafson sank approximately $600,000 into Electric Vehicle and took 50 percent ownership. Gustafson also owns the Summit banks in the Twin Cities, property including the Flour Exchange Building in downtown Minneapolis and the Earl Browne farm in Brooklyn Center.
In the early months of the partnership, Gustafson was seen at Electric Vehicle's plant at 6860 Shingle Creek Parkway, Brooklyn Center, several times a day, according to Michael Livieri, former production supervisor. Gustafson was giving orders and directing personnel at the company, and had reportedly taken the title of chairman.
Gustafson could not be reached last week. Courneya, after a brief telephone interview, referred questions to his attorney.
In the Chapter 11 filing by Electric Vehicle Thursday, about $2.5 million in debts is listed for creditors, including 3M.
Large outstanding debts are owed to some of the nation's largest and most prestigious publications, such as the Harvard Business Review, for advertising that Electric Vehicle used to generate telephone sales. The largest creditor is Media Networks of New York City for $87,343.
Other large debts include $12,146 to IBM; $25,534 to Northwestern Bell Telephone, $19,339 to the law firm of McGovern, Opperman & Paquin; and $29,587 to Lester Electric of Nebraska.
But the greatest hardships could fall on the customers who paid in full for undelivered cars--people like Wayne and Melanie Gunn, farmers in Jay, Fla., who, on June 15, wrote a check for $23,945 for a Bradley GT-II.
"We've only been married for one year, and that was all the money we had," Wayne Gunn said in a telephone interview Thursday night when informed of the bankruptcy action.
The Gunns had hoped to become "brokers," which the Minnesota attorney general's office says was a fraudulent promotion used by Courneya and his company to lure customers into buying a car.
The Gunns said they were told they would become exclusive representatives for Electric Vehicle in their area, which would earn them profits. They said they were told that joining the broker program would qualify them for a discount on their own electric car, reducing the price from $27,000. They said they were told that they would receive tips on prospective customers in their area.
But the sales pitch was a deception and a fraud, according to the complaint filed by the Minnesota attorney general's office last week. Thomas Barrett, special assistant attorney general in the consumer division, said that all the customers received discounts, that there were no tips on prospective customers and that the marketing areas were not exclusive.
Will the Gunns ever get their car or their money? Possibly not, acknowledged Courneya's attorney, C. E. VonFeldt.
The issue will be whether the customers who paid for cars prior to delivery are secured or unsecured creditors. If they are unsecured, then creditors such as Gustafson will have priority in their claims over creditors such as the Gunns.
"I would like to tell you that everybody that put out moneys for a car ought to get one, but I am not prepared to answer that," VonFeldt said. "The bankruptcy court is going to have to tell . . ."
The whole problem developed when the company began accepting payments without the production capacity to build cars.
"It is a cash flow deal right now--the fact that the production line didn't catch up with the cash flow," VonFeldt said.
But others, including Minneapolis investors Robert Erickson and Magnar Tenold, who say they were burned in a financial deal with Courneya and Gustafson, wonder whether assets of Electric Vehicle are being concealed.
They point to irregularities in the balance sheet of GCI, the fiberglass-forming operation that built bodies for the electric cars, and question why Courneya is refusing to acknowledge the validity of their investments.
Together, Courneya and Gustafson negotiated deals involving GCI. But the venture, into which Erickson and Tenold invested $50,000, disintegrated into a series of lawsuits. Tenold is suing for alleged confiscation of furniture, unpaid painting of Courneya's office and other debts.
According to his critics, Courneya's approach to doing business is outlined in a court affidavit describing his reaction to Tenold as a potential investor.
"You get that S.O.B. [Tenold] into my office and let me talk to him, and he'll be down the chimney before he knows what hit him," Courneya is quoted as saying in the affidavit.
Courneya said Thursday that many of the allegations against him are untrue. He referred questions to his attorney.
The 38-year-old son of a Detroit Lakes mailman, Courneya has been in bankruptcy court before. Thor, which Courneya founded, entered bankruptcy court in 1979.
The company, which sold fiberglass cars in unassembled kits similar to those of Electric Vehicle, became insolvent after bankers seized the company's deposits in retaliation for large loans that Courneya and others had taken from the company treasury.
Thor was discharged from the 1979 bankruptcy case in April 1980. However, Courneya's attorney, VonFeldt, said Thursday that Thor would again go into a Chapter 11 bankruptcy procedure as early as this week because of insolvency.
VonFelt said that Thor's debts will be even larger than Electric Vehicle's because the creditors from the first Chapter 11 action were never fully paid as required by the plan approved by the court. Under the plan, many creditors were to receive only a fraction of the amount owed them, but they apparently weren't paid.
VonFeldt said that if shipments of incomplete cars have occurred in the past, they would be stopped in the future.
"My office walks into these companies when they are sick and it's the after match deal," he said. "I Just say, 'From here on in we are going to be honest and have some credibility, and that's the only way we are going to operate.' Well, sometimes it's difficult, but we will do it."
A hearing in the attorney general's suit against Electric Vehicle was held Thursday, VonFeldt said, and an order is forthcoming that should resolve the issues.
VonFeldt said that additional schedules in bankruptcy court will be filed I coming weeks, including a statement of assets of the company, a statement of affairs and supplements to the creditor list.