The case dates back to 2005, when Meadow Financial LLC loaned money to Gloucester Seafood, a company that packaged the haul of local oystermen and sold it to nearby restaurants and stores.
Meadow attempted to collect on its loan but the death of the company’s owner and subsequent dealings with a questionable businessman resulted in years of litigation and recently culminated in the $11.6 million order entered by Judge Thomas B. Hoover.
At an August hearing, Hoover himself bemoaned the “delays and the games that have been played” causing the case to be drawn out over eight years.
The fraud committed by defendants Hale Delavan and his company American Recovery Services was “pervasive and egregious enough” for the court to enter such a high dollar amount at a pre-trial stage instead of waiting for trial, said Adam Casagrande of Norfolk, who represented Meadow Financial.
Gloucester Seafood, operated by George Sterling, turned to hard money lender Meadow Financial for a $380,000 loan.
Sterling struggled to repay the loan and did not do so prior to his death. His estate should have used available funds to pay off the debt, Casagrande said.
Instead, Sterling’s children – two of whom became co-executors of his estate – turned to a man named B. Hale Delavan. Claiming he could grow the operation, Delavan began to manage business for Gloucester Seafood.
But “the debt kept on ticking,” Casagrande said, complete with a very high interest rate and very high penalties. Instead of repaying the loan, the company began to spend its remaining assets under Delavan’s control.
Those assets quickly dwindled as Delavan converted them for his own personal use. Over the course of the litigation, Casagrande discovered that Delavan opened multiple bank accounts – some in the name of Gloucester Seafood and others in the name of various companies he owned – into which he deposited company funds.
Delavan then used the money for a variety of purposes, Meadow Financial alleged, such as taking his wife out to dinner, buying groceries and paying for his child’s private school education, plaintiffs alleged.
Delavan provided limited response in the course of discovery, claiming that he didn’t know how to save emails and that a flood had destroyed most of the documents Meadow Financial had asked for. He even had a plumber testify in court about the leaky faucet that caused the flood, according to Casagrande.
Delavan’s problems grew after Casagrande put him on the stand over a two-day period and repeatedly changed his answers about the various bank accounts opened in his name and the name of Gloucester Seafood, as well as the documents that were produced.
As soon as Delavan stated that he knew of no other bank accounts or that other documentation did not exist, Casagrande would present evidence of an additional account or an email message sent by Delavan.
The court found that Delavan and his company, American Recovery Services, obtained the funds and property from Sterling’s estate and Gloucester Seafood under false pretenses and committed a fraud against the court.
Hoover ruled that Delavan and ARS illegally converted a total of $2,118,318.80 (plus interest) from the funds of Sterling’s estate.
In addition, he granted summary judgment in favor of Meadow, ordering the defendants to pay $380,000 in principal, $3,348,872.01 in lost profits trebled to $10,046,616.03 and real estate taxes of $3,257.36 for a total of $10,429,873.39.
On top of that, the court added attorney’s fees in the amount of $933,032.34 and punitive damages of $200,000.
Although the total damage award equals $13,681,224.53, the roughly $2 million from the conversion award is duplicative of part of the conspiracy award, lowering the amount to be collected to about $11.6 million, Casagrande explained.
While the litigation is ongoing and collection of the award will likely be an uphill battle, Casagrande said the order means his client will finally get some justice in the case.
Philip S. Chapman of Williamsburg, who represented Delavan and ARS, had “no comment” on the case.