Irwin Jacobs sues Genmar bankruptcy trustee

The legal battle to recover more than $30 million for creditors of Irwin Jacobs' bankrupt boat company Genmar Holdings Inc. has taken an unusual turn.

The Minneapolis businessman has gone beyond simply challenging several "clawback" suits seeking funds paid out to him, insiders and Genmar subsidiaries before the parent company filed bankruptcy in 2009. Jacobs has sued Charles Ries, the bankruptcy trustee who has filed the clawback suits.

Twin Cities area bankruptcy attorneys say they've never seen anything like it. "I would say it is highly unusual," said Doug Kelley, the trustee in the bankruptcy case of convicted businessman Tom Petters.

In the suit filed earlier this month in Morrison County District Court, Jacobs claims Ries' clawback suits contain "false, outrageous and defamatory statements" that have hurt Jacobs' ongoing business opportunities. The suit seeks unspecified damages and a jury trial outside of bankruptcy court. The clawback case is in U.S. Bankruptcy Court in Minnesota.

In a statement, Ries said: "The work on this matter continues, and I believe that ultimately it will be shown that the monies paid to Mr. Jacobs, his family, his associates and his other companies need to be returned."

George Singer, a bankruptcy attorney at the Minneapolis firm of Lindquist & Vennum, said suits like Jacobs' are extremely rare because bankruptcy trustees have immunity.

"It is very unusual for someone to seek damages that seem to flow from the trustee's carrying out duties that he has the authority to pursue," Singer said.

Genmar filed for Chapter 11 bankruptcy in 2009, listing assets of about $19 million and liabilities of about $87 million. The case was later converted to a Chapter 7 liquidation. A California private equity firm bought Genmar in 2010, then sold some boat brands made at the Larson Boats plant in Little Falls and others made in Pulaski, Wis., to Jacobs and a partner. Little Falls is in Morrison County, where Jacobs filed the suit against trustee Ries.

Ries' suits say Genmar's financial troubles began in the early 2000s and claim the company had operating losses starting in 2003. Genmar's financial health is an issue if Jacobs and others knew the company was insolvent even as funds were being transferred to other parties.

Jacobs disputes that in his suit, saying that the company was solvent at all times. The suit says the trustee has falsely accused Jacobs and others of receiving transfers illegally and that in some cases there is no evidence of any transfers at all.