Case: 1:16-cv-10778 Document #: 1 Filed: 11/21/16 Page 1 of 7 PageID #:1

UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION

CLIPPER WINDPOWER, LLC, a )

Delaware limited liability company, )
)
Plaintiff, ) Case No: 16-10778
)
v. ) Honorable:
)
BRUCE PAPIECH, an individual, )
JOYCE PAPIECH, an individual, and )
MICHAEL BEDNAR, an individual. )
)
Defendants. )

COMPLAINT

Plaintiff Clipper Windpower, LLC (“Clipper”), by and through its counsel Howard &

Howard Attorneys, PLLC, and for its Complaint against Defendants Bruce Papiech, Joyce

Papiech (Bruce and Joyce Papiech collectively, the “Papieches”), and Michael Bednar

(“Bednar”) states as follows:

Introduction

1. Clipper brings this action to recover millions of dollars in fraudulent transfers

orchestrated by the Papieches through their various entities and made ultimately to enrich

themselves and Bednar at their creditors’ expense.

Jurisdiction and Venue

2. This civil action is between citizens of different states.

3. The amount in controversy exceeds $75,000.

4. Original jurisdiction exists in this Court pursuant to 28 U.S.C. §1332.

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5. Venue is proper because this action is filed in the judicial district in which at least

one of the defendants is domiciled and the transfers at issue occurred.

General Allegations

A. The Parties

6. Clipper is a Delaware limited liability company whose home office is located at

4601 Bowling St. SW, Cedar Rapids, Iowa and whose sole member is incorporated in the State

of Delaware. At the times relevant to the fraudulent transfers described in this Complaint,

Clipper manufactured electricity producing wind turbines.

7. Defendant GSG 7 is an Illinois limited liability company whose business address

is 39W641 Bealer, Geneva, Illinois 60134.

8. Defendants Joyce Papiech and Defendant Bruce Papiech are a married couple

maintaining a residence with the same address as GSG 7 and FPC, i.e., 39W641 Bealer, Geneva,

Illinois 60134.

9. The Papieches are the sole officers of, and own and control, Defendant GSG 7.

As such, the Papieches are defined as GSG 7 “insiders” by the Illinois Uniform Fraudulent

Transfer Act 740 ILCS 160/1 et seq. (“UFTA”).

10. The Papieches are also the sole officers of, and own and control, FPC. As such,

the Papieches are defined as FPC “insiders” for purposes of the UFTA.

11. Defendant Michael Bednar is a resident of Illinois, and was related by marriage to

the Papieches.

12. GSG 7 was formed to develop a wind energy system for the production and sale

of electric power in Sublette, Illinois (the “Wind Energy Project”). Although formed as a limited

liability company in 2007, during the period relevant to this Complaint, GSG 7 did not hold

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liquid assets in its name, including bank accounts. In addition, GSG 7’s sole officers, Defendants

Papieches, have never maintained any separate books or records for GSG 7.

B. The Turbine Supply Agreement

13. On or about October 25, 2011, Clipper and GSG 7 entered into a Turbine Supply

Agreement (the “TSA,” and October 25, 2011 the “Effective Date”). Pursuant to the TSA,

Clipper was to deliver to GSG 7 one Clipper Windpower 2.5 MW Liberty™ series C-96 wind

turbine, including a tower and certain other parts (all as defined in the TSA and collectively, the

“Turbine”). The construction project for the installation of the Turbine was completed on June 6,

2012 (the “Project Completion Date”). In return for the Turbine, GSG 7 was to pay Clipper

$3,339,821, plus certain other costs (the “Project Cost”).

14. Defendant Bruce Papiech, a GSG 7 insider, executed the TSA and a Security

Agreement on behalf of Defendant GSG 7.

15. As an officer of GSG 7, Defendant Bruce Papiech knew that GSG 7 lacked any

assets to pay the obligations to Clipper created by the TSA as those obligations became due.

16. Although GSG 7 made a down payment towards the Project Cost to Clipper in the

amount of $250,000, GSG 7 failed to pay the balance when it became due.

17. By September 13, 2012, GSG 7 owed Clipper a remaining balance of the Project

Cost in the approximate amount of $3,133,381. On that date, because this amount was overdue,

Clipper issued a demand to GSG 7, indicating, among other things, that Clipper would take avail

itself of legal remedies to obtain payment from GSG 7 if the default was not cured.

C. The Section 1603 Federal Grant Transfer

18. In 2009, the U.S. Congress passed the American Recovery and Reinvestment Tax

Act (“ARRTA”). Section 1603 (“Section 1603”) of the ARRTA was a green energy subsidy

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program that included cash grants for certain types of energy projects. The purpose of a grant

under Section 1603 is to reimburse eligible applicants for a portion of the cost of installing

specified energy property used in a trade or business or for the production of income.

19. In connection with the Wind Energy Project, GSG 7 applied for a grant under

Section 1603. On November 23, 2012, GSG 7 was awarded a Section 1603 grant in the amount

of $2,352,007.00 (the “1603 Grant”). Instead of having the 1603 Grant deposited into a GSG 7

bank account, GSG 7 directed the 1603 Grant to be delivered to a bank account held in the name

of FPC from which it was subsequently transferred, in whole or in part, to the Papieches

personally (the “Grant Transfer”).

D. The Electric Power Revenue Transfers

20. The Turbine has been operated by or for GSG 7 since on or about the Project

Completion date. The electricity generated by the Turbine has been and is being sold to

Commonwealth Edison. The sales to Commonwealth Edison and other sources of revenue

produce several hundred thousands of dollars per year.

21. GSG 7 is entitled to the payment of money derived from an asset which GSG 7

owns, including the sale of electricity to Commonwealth Edison. GSG 7 never received any such

proceeds from the sale of electricity to Commonwealth Edison.

22. Instead, an interconnect authorized by Defendant Bruce Papiech commingles the

electricity generated by the Turbine with the electricity generated from another wind turbine

located nearby and operated by GSG 3, LLC (“GSG 3”). GSG 3’s Manager is FPC. Defendant

Bruce Papiech has directed Commonwealth Edison to pay all proceeds, including those

generated by GSG 7’s Turbine, to GSG 3.

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23. Some or all of the revenue derived from the electricity generated by GSG 7’s

Turbine is later allocated by FPC, as manager of GSG 3.

24. Some or all of GSG 7’s revenue from Commonwealth Edison is eventually

transferred through to the Papieches personally (the “Electric Power Revenue Transfers”).

E. The Bednar Transfers

25. The Papieches, as FPC insiders, have also transferred over $150,000 of GSG 7’s

revenue to Defendant Michael Bednar (the “Bednar Transfers”).

26. The purported purpose of the transfer in the immediately-prior paragraph is to pay

Defendant Bednar for time expended in the operation, maintenance and service of GSG 7’s

Turbine, but no time records related to Mr. Bednar’s purported work have been kept and

maintained.

COUNT I

(Fraud)

27. Clipper incorporates paragraphs 1 – 27 as if fully stated herein.

28. At TSA Section 12.3, GSG 7, through insider Defendant Bruce Papiech,

represented and warranted to Clipper that the Agreement constituted a valid and binding

obligation of GSG 7, enforceable against GSG 7 according to its terms.

29. Insider Bruce Papiech knew that the aforesaid representation and warranty was

untrue and that Clipper would rely upon it to its detriment.

30. Clipper did, in fact, reasonably rely upon that misrepresentation in entering into

the TSA and was damaged as a consequence.

31. Clipper requests entry of judgment in its favor and against Defendant Bruce

Papiech, individually, in an amount of no less than $3,133,381.

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COUNT II

(Fraudulent Transfer – Actual Intent)

32. Clipper incorporates paragraphs 1 – 27 as if fully stated herein.

33. Each of the Grant Transfer, the Bednar Transfers, and the continuing Electric

Power Revenue Transfers constitutes a transfer of property of GSG 7.

34. On or before the dates of each of the Grant Transfer, the Bednar Transfers, and

the Electric Power Revenue Transfers, Clipper was a creditor of GSG 7.

35. The Defendants Papieches, through FPC and GSG 7, made the Grant Transfer, the

Bednar Transfers, and the continuing Electric Power Revenue Transfers with the actual intent to

hinder, delay, or defraud one or more of creditors of GSG 7.

COUNT III

(Fraudulent Transfer – Constructive)

36. Clipper incorporates paragraphs 1 – 27 as if fully stated herein.

37. Each of the Grant Transfer, the Bednar Transfers, and the continuing Electric

Power Revenue Transfers constitute a transfer of property of GSG 7.

38. On or before the dates of each of the Grant Transfer, the Bednar Transfers, and

the Electric Power Revenue Transfers, Clipper was a creditor of GSG 7.

39. GSG 7 received less than reasonably equivalent value in exchange for each of the

Grant Transfer, the Bednar Transfers, and the Electric Power Revenue Transfers.

40. On the dates of each of the Grant Transfer, the Bednar Transfers, and the Electric

Power Revenue Transfers, GSG 7 was insolvent or became insolvent as a result of such transfer.

41. To the extent that each or any of the Grant Transfer, the Bednar Transfers, and the

Electric Power Revenue Transfers was made to one or both of the Defendants Papieches for an

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alleged antecedent debt, GSG 7 was insolvent at the time of each such transfer, and one or both

of the Defendants Papieches had reasonable cause to believe that GSG 7 was insolvent.

WHEREFORE, Clipper respectfully requests that this Court enter judgment in its favor

and against Bruce Papiech, Joyce Papiech, and Michael Bednar and order the following relief:

(i) on the First Count, against Bruce Papiech in an amount not less than $3,133,381; (ii) on the

Second Count, against Bruce Papiech and Joyce Papiech jointly and severally, in an amount not

less than $3,133,381; and against Michael Bednar in an amount not less than $150,000; (iii) on

the Third Count, against Bruce Papiech and Joyce Papiech jointly and severally, in an amount

not less than $3,133,381; and against Michael Bednar in an amount not less than $150,000; (iv)

attachment or other provisional remedy against the assets transferred or other property of the

transferee in accordance with the procedure prescribed by the Federal Rules of Civil Procedure;

(v) an injunction against further disposition by GSG 7, Bruce Papiech, Joyce Papiech, and

Michael Bednar of the assets transferred or other related property; (vi) appointment of a receiver

to take charge of the assets transferred or of other property of the Papieches; and (v) such

additional relief as this Court may deem appropriate.

DATED: November 21, 2016 By: /s/ James E. Morgan

James E. Morgan (Fed. I.D. No. 90785074)

HOWARD & HOWARD ATTORNEYS

200 S. Michigan Avenue, Suite 1100
Chicago, IL 60604
Tel: (312) 372-4000
Fax: (312) 939-5617
E-mail: jem@h2law.com

Counsel for Clipper Windpower, LLC