Chairman of paper mill acquirer alleges embezzlement, missing $1 million

CHEBOYGAN — According to an official of the company that purchased the Great Lakes Tissue Mill in Cheboygan earlier this year, when the transaction closed, the company discovered $1 million had vanished and a bank account had nothing in it.

More: Great Lakes Tissue ownership changes hands

Tissue Depot, a subsidiary of Patriot Advanced Environmental Technologies, acquired the Great Lakes Tissue paper mill in January from an ownership group led by Kip Boie, which had purchased the facility in 2022. Patriot renamed the mill Tissue Depot.

Two months later, Prime Alliance Bank and Sertant Capital sued Great Lakes Tissue for not making payments on more than $2 million in leased equipment. Prime Alliance Bank and Sertant said they'd leased equipment to Great Lakes Tissue in 2022 at a rate of about $68,000 a month.

That case in federal court in Detroit offers a behind-the-scenes look at the sale of the paper mill from one insider. Donald Swenson, who said he's the chairman of Patriot Advanced Environmental Technologies, alleged in a court filing that his group discovered an elaborate scheme of self-dealing and embezzlement involving Great Lakes Tissue by Boie.

"After buying GLT but before selling it to PAET, Boie attempted to secretly sell off all of GLT’s assets (including the subject equipment as well as future receivables)," said the Swenson declaration.

"Notably, the equipment at issue here could not be sold because that equipment was already offered as collateral to secure other corporate obligations," Swenson continued.

Swenson also claims that Boie set up two secret bank accounts in the name of GLT in an apparent effort to keep his fraudulent sales “off the books.” Boie controlled both of these accounts and GLT hasn't been able to get access to them, according to the Swenson filing.

Swenson said that over $1 million has disappeared with no explanation and that Boie emptied an account at Citizens National Bank on Jan. 13, the day the closing documents for the sale of the mill to PAET were signed.

Prime Alliance and Sertant wrote in a court filing that GLT changed ownership without their consent, which is a violation of the lease. They've also demanded that GLT comply with the lease.

"Despite these demands, GLT failed and refused to perform as agreed," said the filing.

In a court filing on April 12, both sides agreed that Great Lakes Tissue will refrain from damaging, destroying, concealing, disposing of, moving, or using the disputed equipment at the mill "so as to substantially impair its value" and that the equipment shall not be moved or relocated from the mill.

Boie did not respond to a phone message seeking comment.

A spokeswoman for Tissue Depot told the Daily Tribune on Wednesday, April 19, the mill was operating with about 40 employees.

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Meanwhile, Cheboygan City Manager Dan Sabolsky confirmed the city has received a $14,000 payment for overdue water/sewer and water testing bills at the mill.

“For over 50 years, what's currently known as the Tissue Depot has been a significant employer for Cheboygan County. Though the specifics of the issues that are currently being reported are outside of the responsibility of my role to engage or address, as a community member, I remain hopeful that the plant manages to once again be a successful manufacturing facility," wrote Sharen Lange, Cheboygan County Economic Development Coordinator, in a statement.

At one time — when the mill was owned by the Procter & Gamble Co. — employment at the facility totaled nearly 700, according to previous news reports.

— Contact Paul Welitzkin at pwelitzkin@gaylordheraldtimes.com.

This article originally appeared on Cheboygan Daily Tribune: Chairman of Cheboygan paper mill acquirer alleges embezzlement, missing $1 million