The three Morgan County residents named as defendants in a civil lawsuit filed Dec. 31, 2013, say their upcoming answer set to be filed soon with the 2nd District Court will “exonerate all claims.”
“To us, this is a non-issue,” said Mountain Green resident Stacey Welsh, listed as a defendant in the case.
Attorneys for defendant Stephen Dredge, Mountain Green resident, agreed.
“I think when the facts come out it will be transparently obvious that Steve has done nothing wrong,” said Mark F. James of Hatch, James & Dodge. “Complaints are often based on incomplete knowledge of facts, and a party to a lawsuit is free to say in pleadings filed with the court pretty much anything that party chooses, regardless of the true facts.”
“This is unfounded, unbased, and frivolous,” defendant Ed Welsh said of the lawsuit. “There is no shred of factual evidence. They can’t prove one thing.” Welsh shared with The Morgan County News various documents backing up his claims including bank statements, patent transfer documents, income tax forms, vehicle loan documents and mortgage loan statements.
Plaintiffs Kris Thorkelson and Kevin Fleury filed the complaint alleging “turmoil in management” and “extensive waste,” seeking $2.5 million in damages.
According to court documents, in 1995, Thorkelson co-founded a Canadian corporation by the name of QB Technology Canada Corporation. The business owned all rights associated with a Canadian patent for a “synthetic panel and method” that could be used to manufacture wall assemblies for commercial and residential construction.
In 2006, Thorkelson began selling licenses to the patent. That’s how Thorkelson, a Canadian, met Utahn Ed Welsh. Welsh proposed forming a business with Thorkelson to manufacture construction panels using the patent’s technology. Thorkelson and Welsh reached an agreement and founded QB Technology International, Inc. as a Utah corporation.
Welsh asked Thorkelson to move from Canada to Utah. Both had signing authority on a bank account at the Mountain Green Branch of 1st Bank.
The two then formed a new company by the name of New Harmony Homes, which would construct living units in an Ogden warehouse before shipping them to North Dakota to be used in a hotel project there.
Upon Welsh’s recommendation, Terry Goers of Roy was added as a contractor in the New Harmony Homes company. Terry Goers acted as New Harmony’s director while his ownership interest belonged to his son, T.J. Goers.
Kevin Fleury was a broker in London, England. The suit claims Fleury designed and garnered $8.5 million in investments for construction of a hotel to be used as oil worker housing in the Bakken oil fields of North Dakota. In 2011, Fleury was added as a director to New Harmony and allegedly contributed a total of $7 million into New Harmony’s accounts through his capital-raising efforts.
However, Welsh told The Morgan County News that Fleury never actually deposited money into the company, and Fleury and Thorkelson never had any shares. “He never put a dime into the bank account,” Welsh said of Fleury.
New Harmony now had four directors: Canadian patent-holder Thorkelson, Utahn Welsh, contractor Goers, and English capital-raiser Fleury. They allegedly all signed an operating agreement at Welsh’s residence that detailed a vote of 75 percent of directors would be required to remove any director from the company.
Welsh then recommended adding Stephen Dredge as a fifth director. Dredge was given signing authority for New Harmony “because Thorkelson and Fleury were not U.S. citizens, and Welsh and Goers claimed to have poor credit,” according to court documents.
Welsh, Goers and Dredge had something else in common aside from their U.S. citizenry: their membership in the Church of Jesus Christ of Latter-day Saints. The claim filed attests that the three convinced their English and Canadian partners that membership in this church meant they “could be trusted in business transactions.”
Because of Dredge’s employment with the Church of Jesus Christ of Latter-day Saints, the LDS Public Affairs Department is aware of the suit, but refused to comment.
Thorkelson claims to have deposited over $200,000 from capital contributions from the sale of his patent licenses to New Harmony. The funds were allegedly used to purchase office equipment and lease warehouse space where hotel units would be constructed until investor money came in. New Harmony opened their Ogden manufacturing facility in March of 2012, according to court documents.
Welsh denied these claims, saying again that the plaintiffs did not contribute money to the business. In fact, over the years, Welsh said he offered both men monetary help. When Thorkelson came to Utah, it was after becoming homeless in Canada according to Welsh.
“He had no money at all,” Welsh said. “We had to sign for his first apartment.”
In February of 2012, Welsh said Fleury sent several emails “crying for $10,000, because he was broke.”
Court documents read that Thorkelson eventually transferred his patent rights to New Harmony. At some point, the rights to the patent were transferred “without consideration and without following the proper corporate formalities” to Fox Hollow Investments, LLC, where Dredge served as the registered agent.
Welsh claims Canadian Intellectual Property Office documents regarding the Global StructSure patent show an entirely different story. He shared stamped patent transfer documents prepared by an intellectual property lawyer with Thorkelson’s signature on every page with The Morgan County News.
According to court documents, under Welsh’s management, large amounts of money “started to go unaccounted for.” He wrote checks to himself and his wife, Stacey, “for no apparent reason other than to enrich Stacy Welsh and himself.” Welsh allegedly used investor funds to purchase vehicles for himself and his family and pay down a mortgage on his personal residence valued at $800,000. Welsh’s Mountain Green home had previously been in foreclosure.
Welsh shared vehicle loan documents as well as mortgage loan statements with The Morgan County News showing that his vehicle was purchased through a loan prior to New Harmony’s formation, and his home loan had been modified and in fact is not paid off.
At least seven business entities (QB Technology International doing business as Premier Technology International, Global StructSure, and StructSure; New Harmony Homes Development; New Harmony Homes & QB; New Harmony Transport; NH Holding; T&C Holdings; and Fox Hollow Investments) were then allegedly created, unrelated “side-businesses” and “alter egos” funded by New Harmony money. The defendants allegedly hired friends and family members “to receive a salary from New Harmony but who did not add any value” to the company.
After being served with court documents, Welsh didn’t recognize many of the business names listed as defendants in the case and started researching them. He said with a town named New Harmony in Washington County, Utah, it was difficult to originally secure the name New Harmony Homes. So, he knows how difficult it would have been to legitimately secure a handful more, which he didn’t, Welsh said.
“For two guys who claim they own shares, wouldn’t you think they would know the names of the businesses?” Ed Welsh asked.
Welsh allegedly opened and held sole signing authority to several other bank accounts, and “made spending decisions unilaterally without proper voting,” the suit reads.
According to court documents, Plaintiffs Thorkelson and Fleury noticed millions of dollars were missing from New Harmony while Welsh and Goers were acquiring personal assets such as new vehicles, guns and land. Documents also claim, no “proper” directors’ or shareholders’ meetings were ever held. In the meantime, the North Dakota project remained incomplete.
In June of 2012, Thorkelson and Fleury asked their three other partners to account for the funds. The three allegedly did not oblige.
Fleury attempted to call a board meeting in May of 2013 “to discuss ways to salvage New Harmony, including the removal of Welsh from the CEO position.” Fleury and Thorkelson were then allegedly given a termination notice signed by Goers without reasons or consideration.
Thorkelson and Fleury maintain they were both removed from employment with New Harmony without the proper voting percentage, as well as deprived of anticipated profits.
Now the three Utah partners, as well as their “side businesses” and Welsh’s wife, are listed as defendants in a civil lawsuit for breach of fiduciary duties, breach of contract, as well as their failure to act in the best interest of New Harmony, misuse of investor monies, and unwillingness to properly maintain corporate formalities. The lawsuit insists the three “took property with the intent to permanently deprive (Plaintiffs) of that property.”
The plaintiffs are seeking damages in the amount of $2.5 million, as well as the return of intellectual property associated with the patent. They say, “New Harmony’s assets are being misapplied and wasted by those in control” and are they are seeking to recover missing funds.
The plaintiffs are also seeking dissolution of New Harmony and the other businesses the defendants created, alleging that “If Welsh, Goers and Dredge are allowed to continue operating…they will continue to perpetrate injustices by attracting investor monies and then using those funds for their own personal use.”
On Jan. 15, the Securities and Exchange Commission in Salt Lake City was notified of the complaint.
Welsh said the lawsuit was a “ploy to soften the blow” of two counts of third-degree felony burglary and two counts of second-degree theft that Thorkelson faces after allegedly breaking into the New Harmony Homes facility at 194 W. 33rd Street in Ogden in August. Investigators say some $40,000 worth of equipment was stolen.
“We are not the type to sue anybody. We don’t lie, deceive and make slanderous remarks,” Welsh said. “We have been trying to fix the damage they did to our company. We are still surviving. Our company has been hurt by two people. But we have forgiven them.”