Here is a photo of Jim Montgomery's Nor'Sea 27. I sold Jim this
boat January 10, 1992. It was a boat that was fully equipped and ready
for sea. He named the boat "Bungearn" , St. Clair Shores, MI was the hailing
port. He financed this boat with Ganis Credit Corp, a local Southern California
based loan company that our factory has used extensively over the years for
Nor'Sea 27 loans. After having his loan approved, the boat ready and all
necessary documents ready, I personally delivered the papers to Peggy
Bodenreider a Ganis VP who, like always, gave me a check for the boat. This was
the normal routine that I followed for almost a decade. It was a done deal. A
routine, honest boat sale. I deposited the $74,451 dollar check in the
company account and drove out to the factory where we had a full crew working on
perhaps 14 boats. I was relieved to sell the boat because like any business, we
had parts to order, payrolls to meet, bills and overhead expenses on our 23,000
square foot building. Fixed overhead was $2400 per day and we were spending an
average of up to $10,000 per week on parts and materials at that time.
(sometimes much more. Later that very same week we bought 6 engines for over
$20,000) Details like shipping the boat east to Detroit Michigan (where Jim
lived) were next on the agenda.
A couple of weeks went by and Jim Montgomery called to say he wanted a brand new Nor'Sea 27 built from scratch, instead of his recently purchased boat "Bungearn" (see photo). He wanted a hot water tank, an Ample Power system and some different options that weren't installed on "Bungearn". This put me in a difficult position. While Jim had paid me in full for "Bungearn", I really couldn't afford to refund his money. (because I had already spent most of it on the business) One way to remedy the situation is to go ahead and sell "Bungearn" again, but it now had a lien from Ganis Credit Corp on it for $74,451 and could not be sold until or unless that loan was paid off. I told this to Jim and agreed to start a new boat that would take a while because we had a full shop full of boats ahead of him.
I stored "Bungearn" at the factory and work proceeded on Jims new Nor'Sea 27. We were perhaps backlogged more than 18 months. Jeff our production manager was starting to get behind with deliveries and people were starting to complain. We had 15 boats on the line and it was very stressful.
After building Nor'Sea 27s for the previous 12 years it seemed like we were over-whelmed with chaos. Like on a treadmill. We had hit that bell-curve of inefficiency but didn't know it yet. (see Boat Building Basics)
Jim Montgomery lived in the Detroit, Michigan area and now he did something that no one knew about. Around November, 1992 Jim walked into a local Detroit bank named: NBD Bank, N.A. (a bank I had never even heard of) and with 'copies' of his original purchase order for "Bungearn", applied for new financing with the purpose of paying off the original Ganis Loan from back in January, 1992. While we at the factory were oblivious to this loan, it never the less was funded and the Ganis Loan was paid off. (we didn't find any of this out until later) Lets call this Loan "Illegal Loan #2"
In the meantime, we had been trying to sell the original "Bungearn" (now re-named Sundance) to Fred Booth. But we couldn't get a clear title on it. After waiting for 10 months Fred changed his order to have us build him a new boat. Before that we had some employee problems and one time Fred was staying overnight on the boat and someone had taken a screwdriver and actually obliterated the hull number. For what reason? Who knows. I had to move the boat back to the factory for repairs. We actually know who did this, we just can't prove it.
Business was getting bad. Jeff, the production manager was hopelessly behind in production. Orders were drying up and by this time I personally had re-financed my home to put $100,000 into the company. Then an additional $75,000 from credit cards, I sold a Nor'Sea to Glen Justice for less than cost, another $58,000. I took a boat loan out on a no-pay customers boat who went bankrupt and couldn't pay us, for $60,000. I put every penny into the factory and even that wasn't quite enough. We had people who owed us large sums of money but couldn't pay. (seek and ye shall find)
I had run out of money in April 1993. I was determined to get rid of Jeff, move the factory and finish up the 6 boats that were partially finished and behind schedule. Jeff had seen the writing on the wall and started calling my customers from his home in the evening. Panic set in.
Jim Montgomery was in a fix. Here he had secretly obtained Illegal loan#2 from this Detroit bank and he was certain, dead certain that I was going out of business. Jeff had convinced everyone that there was no hope.... BEEP! WRONG.!
I had no intention of going bankrupt. But I had talked to probably 3 different attorneys about the situation and all of them recommended and immediate Chapter 11 to buy some time and then ease into a Chapter 7. It sounded like an easy solution to an ever widening problem. I really had no assets to seize. The tooling wasn't mine. My house was mortgaged to the hilt, my credit cards were maxed out and I owed the Bank close to 60 thousand on a Nor'Sea 27 in the harbor. I expected at least 3 Lawsuits but going BK would erase and invalidate all my debt and all the Lawsuits. It would solve MY problems.
But it wouldn't solve the problems of the 6 customers who had partially finished boats sitting in my factory. What to do....
I had to make some hard decisions. To do whatever it took to get the show back on the road. I knew that Jeff had convinced Gerry Van Wesep and Charlie Pepper to let him take their boats over to a shop Jeff was setting up. They left. I knew that these people would probably hate me but as least they would have a boat. If I had gone bankrupt, it would have taken more than a year and everyone would have lost their boats. I feel I did the right thing considering the situation.
Jim Montgomery started to panic. To try and cover his tracks on this Illegal loan#2 problem (a loan we knew nothing about) he started faxing over messages like these:
April 28, 1993
It has come to my attention that Nor'Sea Marine has ceased operation.
My boat is still in your factory for post delivery outfitting.
I hereby demand the release of the boat from your factory.Respectfully
Jim Montgomery
2899 E. Big Beaver #223
Troy, MI. 48084
And this one:
May 7, 1993
Subject: Release of my boat from Nor'Sea Marine
This is the second request for immediate release of my boat which was retained by Nor'Sea Marine for post delivery outfitting.
The attached purchase agreement, signed by you, identifies the boat and equipment.
I expect immediate action or I will be forced to obtain the assistance of the California Attorney General's office.
Jim Montgomery
******
Post delivery outfitting?
Jim knew his boat wasn't close to completion. So what was he going to do with a partially completed boat? Have Jeff finish it? No. Jeff was charging LOT$ of money to finish the other two and Jim wasn't in any position to pay Jeff double what it should cost. Jims only hope was to be patient.
I talked to Jim on the phone on an almost daily basis. I told him that I would be moving the Nor'Sea Factory to a new location and we would be closed only for one month. If he could just relax, I would finish his boat in short order. He was absolutely convinced, despite
reassurances, that I was going Bankrupt. I told him that I had some orders
for boats coming in later this summer (1993) and had already hired back some of
the carpenters that Jeff had fired earlier. Friends with large trucks, cranes
and large forklifts helped us move to a new location. We sold some more boats
(that were built and are being sailed and enjoyed to this day) and started
catching up. We finished Mark Nelson, continued on Whit Gilman and Fred
Booth (who had changed his order to a new boat). Gilman, Booth and Montgomery
were the only boats left to finish by the time we moved. Jim Montgomery's boat
was now in our new shop and we were getting ready to finish him up also, but he
Started faxing over threats. He started a campaign to put me out of
business during our move. He started advertising his un-finished boat for sale
in the back of Cruising World and Ocean Navigator. When people called his Ad, he
would tell them that Nor'Sea Marine was Bankrupt and do everything he could to
scare customers away.
In June 1993, Jim Montgomery decided to file a
lawsuit for 'Fraud". What possessed him to do that was beyond reason. It was
obvious that I hadn't defrauded Jim. Why would I put all my money, home
and bank loans into a company if I had intended to defraud anyone? It
didn't make sense. His hull was done, his engine was installed, interior in, all
I needed was to deck his boat, cap rail it and finish the trim and he would be
finished. Instead, I had to give my attorney several thousand dollars to defend
this frivolous lawsuit. Money that could have finished his boat went to legal
fees.
We tried for months to work something out. Jim just wouldn't back off.
It turned out the reason he was suing for 'fraud' if that if you have a fraud judgment against you, you can't discharge that kind of debt in a bankruptcy. He thought he would get more than his un-completed boat, he thought he would get the company and any assets it had.
We answered the lawsuit and my attorney said that in the LA area, it would take close to 2 years before a civil trial came on the calendar.
I told Jim that as long as I was spending money on attorneys fees and he was running those Ads in magazines trying to put me out of business, I would not work on his boat.
We were cooking at the new shop. We now had close to 13 boats under construction, boats were being finished and shipped and we were even making progress on Gilman and Booth.
Jim Montgomery was doing everything possible to put Nor'Sea Marine under. Running Ads in boating magazines, writing letters to boating magazines, Practical Sailor, Loan companies, the Better Business Bureau. Calling people and customers at home using phone numbers that Jeff gave him.
You would think if Jim had wanted us to finish his #2 Nor'Sea 27, he would want us to do well. To have enough business to 'stay' in business. To be able to finish his boat without suffering lost boat sales. This man was beyond logic. Beyond common sense. My lawyer decided that there was nothing we could do to appease this man. Even if we gave him a boat, he would not agree to drop the fraud lawsuit. As you shall see.
I decided, rightly or wrongly that since it would be 2 years before this lawsuit would be heard, to go ahead and sell Jims boat. In retrospect, I made a mistake and should have just stored it at the factory for 2 years, finishing it as time allowed. But Jim was costing us big money and many lost sales. He wasn't in the mood to wait a few months and get the boat. During our many settlement offers, from both camps, he would not cooperate and refused to quit costing us orders. His letter writing campaign continued. His Ads in Cruising World continued and we continued to lose sales.
Soon this logical man decided to stop making payments on Illegal loan #2. (the secret Detroit bank loan). If you think about it for a second.... why would you stop making payments on a loan that has no collateral? Didn't he know that this bank in Detroit would try and repossess this phantom boat he got a loan on? He made his last payment in December 1993 and sure enough Jim Montgomery was sued for the loan amount.
On April 11, 1994, the NBD Bank of Detroit Michigan sued Mr. Jim Montgomery
for the Loan amount of approx $74,000, for FRAUD which listed the following
allegations. (remember that we still don't know about this loan) : From Duane M.
Beeman, Attorney at Law for NBD Bank...
The allegations are:
It gets better. As soon as Montgomery got this lawsuit from the NBD Bank, he faxed a copy of it over to me on April 15, 1994 with a note that said:
To: Bob
From: Jim
For your information
Don't feel slighted Bobby. Beeman assures me you will be called into the game shortly..
Regards
J
Now this date of April 15, 1994 is the FIRST time we heard or knew about this secret NBD loan on a boat that Jim Montgomery was trying to put us out of business over.
I called my attorney and he called Duane M. Beeman the NBD Bank Attorney. After about 2 minutes Duane knew we had not one clue about this loan. He acknowledged that and said he would be sending out a formal letter to REPOSSESS this boat or whatever we had.
We received a letter dated May 12, 1994 which reads something like this:
Dear Mr. Eeg
It is my understanding that you are presently in possession of a ........
watercraft which is collateral for a loan from NBD Bank to James Montgomery. .........
NBD Bank, N.A. is hereby requesting that you SURRENDER POSSESSION of the watercraft to an appointed agent of NBD.
This can be accomplished by contacting me and making the necessary arrangements.
bla, bla, bla.....
Duane M. Beeman
Attorney at Law
So now we have a situation that is complicated. We have Jim Montgomery who now has a judgment against Him for this fake loan. We also have a powerful Bank who is telling me not to give Jim
Montgomery this boat, but to surrender the boat to them.
What can I do? I decide that Jim is in a heap of trouble and I will go ahead and build him his boat. I figured its another entire year before we butt heads in civil court. I realize that this man is as stubborn as a mule and I had just witnessed him make some very bad mistakes over the last several months. example:
So I have a year to build Nor'Sea 27 number 3 for Jim Montgomery. I start building number 3 boat for Jim, despite losing large amounts of orders that he has discouraged. His un-relenting Ads still go on in Cruising World, Ocean Navigator and Sail. People who call inquiring about a new Nor'Sea 27 start canceling their visits to our factory after talking to Jim Montgomery. But still, I am building boat number 3 just to save him from himself.
I didn't have any reason to build this boat. I had done nothing wrong and while Jim did pay for a boat and changed his mind about it later, I had done my part and delivered "Bungearn". This fraud lawsuit was really starting to piss me off. Lawyers cost money and if Jim had just been more normal all the money used for attorneys would have built his boat.
But it gets even better.
Along about October 5, 1994, about 5 months after the NBD Bank won the money judgment against Jim Montgomery, we receive a SUBPOENA for 'Documents only' (no people) on all information about Jim Montgomery and his dealings with our company. "For any records, associated with the boat......etc" This was from the United States District Court , eastern district of Michigan and it was for a Grand Jury Investigation.
Grand Jury
950 Federal Building
231 W. Lafayette
Detroit Michigan 48226
October 5, 1994. 9:00 am
So Duane M. Beeman, Attorney for the NBD Bank of Detroit Michigan turned Jim Montgomery in to the Feds for alleged bank fraud.
We sent what documents we could dig up. Probably left some out. So once again Jim is cutting off his nose to spite his face.
But I continued to build Nor'Sea 27 number 3.
Then comes The civil trial. Its now April 9, 1995. We've waited almost 2 years for this. The completely malice filled Practical Sailor article of Oct. 15, 1994 has come out and the bad publicity has ground our factory to almost a complete stop. We are letting our employees be paid directly so some kit boat buyers can get boats finished (many to completion instead of kit). All these great employees will be soon out of a job, many with home mortgages and children to feed. Such malice and irresponsibility was the flavor of this Practical Sailor article that I wondered how that company could hire such a hack.
Jim Montgomery's new buddy, writer Tom Gannon who wrote this piece has really done a intentionally poor job of reporting. So bad and so inaccurate it has to be malicious because nobody could be that stupid. In fact, one of the subjects of that article called me at home and said that Tom Gannon really had it our for me and to expect a one sided story that portrayed me as a villain. (More on this in another link)
So were sitting in court. We have the third Nor'Sea 27 finished to where it needed cushions, some oddball parts and a mast and boom.
We tell the Judge that the Boat is finished and we offer it to Jim Montgomery. The Judge says we all have to pile into cars and drive out to the factory so Jim can look at the boat. (Jeff was with Jim)
After looking at the boat, we all drive back to the courthouse. The Judge offers Jim and his attorney only one choice. Either take the boat and drop the lawsuit OR await his verdict on the fraud allegation. They could only pick one option. Take the boat or gamble on the fraud. If they got a 'no fraud' verdict then they could NOT have the boat. If they got a fraud ruling then they would win the boat and fraud damages. They huddled and talked among themselves. My attorney and I were confident that no fraud was apparent. (its a no brainer).
They stood up and said they didn't want to settle for the boat and they would await the verdict for fraud.
The judge looked at them as if they were out of their mind. He shook his head and said. 'No Fraud' what so ever.
They lost the boat and the phony fraud charge.
Because Jim Montgomery did give me $74,451 for the first boat named "Bungearn" we conceded that amount in a money judgment against me and Nor'Sea Marine.
Jims attorney later told my attorney that they couldn't take the boat under any circumstances because the NBD Bank of Detroit Michigan was going to REPOSSESS it. And they wouldn't re-write Jims loan that he defaulted. That's a shame really, because all this crap would have had a happier ending.
Since that time Jim has been a busy boy. All the while complaining he still doesn't have his Nor'Sea that I promised to build him, he maintained an Ad in Cruising World, Sail and others that said:
Nor'Sea 27 Owner, holding judgment exceeding $100K against Nor'Sea, will sell rights to new Nor'Sea 27, (281) 458-2087
That went on for a few years....
Even still later set up his website that has been up for many years.
On the web and bulletin boards he started to slam the construction of the boats. anything to deter these fine vessels from being built and anything to cause other Nor'Sea owners harm when he slams the boats. He has little regard for customers after 1993 and apparently doesn't care if he causes them grief. Like Tom Gannon who writes trash without regard to accuracy and without regard to hurting those 6 kit boat people who were around when he wrote that malicious piece. Why should he worry, its not his money, its not Practical Sailors boat?
Read the Tom Gannon, Practical Sailor section and how its obvious that this company acted in callous disregard towards Nor'Sea and its customers. They are not to be trusted as a consumer magazine for the sailing industry.
Should Practical Sailor reimburse customers who spent money and time reacting to this one sided and malicious article?
Also see a list of other victims of Practical Sailors witch hunts. (under construction)
So what happened in 1992? Did I cheat Jim Montgomery out of a boat when circumstances beyond my control forced me out of business? Or did I suddenly turn evil after 12 years of honest boat building? Or more likely, Jim Montgomery made some bad decisions and lost all logic. Got greedy? Who knows..........
All I know is that I did nothing but work hard, stayed the course so people could get a boat and made some mistakes myself but NO MALICE WAS INTENDED.
Thank you.
Bob Eeg