Governor French Academy files another suit alleging fraud in copier lease

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Governor French Academy files another suit alleging fraud in copier lease

8/11/2009 9:10 PM
By Kelly Holleran

A St. Clair County company has filed a second suit this year over allegations another business should have known of a man's attempts to defraud it out of money.

Governor French Academy filed a lawsuit Aug. 5 in St. Clair County District Court against Axis Capital.

The suit is nearly identical to a June 29 complaint GFA filed against Marlin Leasing.

In both complaints, GFA claims a man named Kevin Welch solicited leased copiers and printers to the company.

GFA entered into an agreement with Marlin Leasing in September 2005 to lease the equipment, according to the August complaint.

Later, the company entered into an equipment lease agreement with Axis in August 2006, the suit states. Welch claimed any money paid to Axis would be used to pay off debt GFA owed to Marlin Leasing, the company contends.

Again, GFA entered into another lease agreement with CIT in June 2008, in which Welch represented that a portion of funds paid to CIT would be used to pay off the Axis debt, the complaint says.

"In the spring of 2009, GFA began receiving bills for the lease payments related to Lease 2," the suit states.

When GFA contacted Axis to say that its payments toward Axis were supposed to also be going to Marlin, the company informed GFA it was still liable on the Marlin lease, according to the complaint.

"Welch entered into and promoted a scheme of transactions with GFA wherein Welch would make a lease with GFA through a financing company such as defendant, who then became lessor to receive payments from GFA," the suit states. "In each succeeding lease Welch represented to GFA that the monies received from the negotiations of a new succeeding lease would be used to pay off the balance of the prior lease, so that at all times, GFA would have only one lessor. Upon information and belief, Welch used the proceeds from the old leases for his own use, and not to pay off previous leases as represented."

Axis knew, or should have known, of Welch's fraudulent scheme, but failed to warn GFA of it, the company contends.

GFA is seeking a judgment of more than $50,000, plus other relief the court deems just.

Kevin J. Stine of Mathis, Marifian, Richter and Grandy in Belleville will be representing it.

St. Clair County Circuit Court case number: 09-L-410.

8/12/098:54 AM

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Art Post (Guest)

BELLEVILLE -- Governor French Academy may have to file for bankruptcy to protect itself financially from a dispute involving copy machines, the school's headmaster said Thursday.

"We started to receive bills out of the blue for copiers we don't have," said Governor French founder Phillip Paeltz.

Paeltz said the school has done business with Kevin Welch, of Okawville, for nine years, leasing copying machines from various companies the school staff thought Welch represented. The school staff was under the impression the leases were terminated when they returned the copiers to Welch but discovered later that some of the machines were never returned to the companies, according to Paeltz.

Welch could not be reached for comment Thursday.

Now seven leasing companies are suing the private K-12 school, accusing it of being in possession of 14 copiers. Paeltz said the value of the leases and the machines comes to an estimated $500,000.

Paeltz said the school tried to work through the situation with Welch in April, when school officials first started getting erroneous bills from the copy machine companies, and Welch, according to Paeltz, told the school he would take out a loan to pay the money owed. When he failed to do so, the school filed a civil fraud lawsuit against Welch in July. The lawsuit is pending.

Paeltz said he knows of at least two similar incidents occurring in Illinois, one at a church in Madison County and one at a senior citizens center in Okawville.

Paeltz said the school's next step is to send proposals to the seven companies to settle the dispute.

"If they accept it, then I guess this is over," Paeltz said. "If they don't accept it, we will file for Chapter 11 protections."

Paeltz said a judge will determine the exact amount of the damages in court Wednesday.

9/7/0910:40 AM

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Art Post (Guest)

BELLEVILLE -- The determination of the amount of damages in Governor French Academy's civil fraud lawsuit against an Okawville man was postponed until later this month at a hearing Wednesday when the judge granted the man more time to file his response.

"I believe that we will prevail," Governor French Academy attorney Kevin Stine said of the case.

The school is seeking $50,000 in damages and fees from Kevin Welch regarding a dispute involving several leases for copy machines, according to the lawsuit. It alleges Welch pocketed money from leases the school administration thought were terminated, money that Welch told school officials would go toward new lease payments.

Word Document: Governor French lawsuit

"The fraudulent acts of Welch were intentional in nature and were done with the intent to defraud (Governor French Academy)," the lawsuit states.

Welch could not be reached for comment Wednesday.

Paeltz has said the school has done business with Welch for nine years, leasing copying machines from various companies the school staff thought Welch represented. The school staff was under the impression the leases were terminated when they returned the copiers to Welch but discovered later that some of the machines were never returned to the companies, according to Paeltz.

Now seven leasing companies are suing the private K-12 school, accusing it of being in possession of 14 copiers. Paeltz said the value of the leases and the machines comes to an estimated $500,000.

He said the school may have to file for bankruptcy for financial protection should the companies reject its proposal to settle the disputes

9/10/098:10 AM

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Art Post (Guest)

Governor French is seeking $50,000 in damages and fees from Kevin Welch, of Okawville, regarding a dispute involving leases for copy machines that it returned to Welch in exchange for newer copiers under their two-machine lease, according to the complaint. Welch could not be reached for comment.

The complaint accuses Welch of pocketing money from leases rather than paying suppliers.

Now seven companies are suing the private K-12 school, accusing it of being in possession of 14 copiers. Phillip Paeltz, head administrator, said has said the value of the leases and the machines comes to an estimated $500,000.

Belleville Police Capt. Don Sax said it is difficult to determine whether a criminal investigation will take place until more details are available. He said it is also hard to say whether the case will ever be prosecuted since the contracts in question are civil.

For more on this story, read the News-Democrat on Tuesday or return Tuesday to bnd.com.

9/15/0910:04 AM

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