A couple who have owned two of Eastport's downtown buildings since 2003 are being sued for alleged fraud by businesses in Massachusetts and have filed for bankruptcy. The island community was shocked to learn the news when an article in The Boston Globe began to circulate on July 6.
     The first sign that the owners, Patricia and Kjell Morgan Lindau, were in difficulties appeared in early summer when the 73 and 75 Water Street properties suddenly sported signs announcing that the buildings would be subject to a foreclosure auction on July 14 by the Keenan Auction Company on behalf of Camden National Bank. For a number of years the two downtown buildings were rented to the popular Moose Island Bakery and seasonal gift shop Without a Paddle. The Lindaus periodically renovated different portions of the buildings, most recently with new roofing, windows and copper flashing. The Lindaus, who visited their Eastport properties frequently over the years, resided in Newburgh, Maine.
     The Lindaus and their payroll accounting company, Northeast Abacus Inc., allegedly have failed to make tax payments to the Internal Revenue Service (IRS) and the Commonwealth of Massachusetts on behalf of their clients, many of them restaurants, some of whom had used the company for many years.
     In their bankruptcy filing, the Lindaus state that they estimate they owe between 50 99 creditors an amount between $1 million and $10 million. The list of creditors includes 61 names, including restaurants, municipalities and a range of other businesses.
     Whether the auction will take place or not is now being battled in the U.S. Bankruptcy Court for the District of Maine by Camden National Bank and the Lindaus, their Water Street Eastport Realty Trust and their company Northeast Abacus.
     Camden National Bank, which made a number of loans to the couple, states in its court filing that there are "allegations that the business made hundreds of thousands of dollars of unauthorized ACH [Automatic Clearinghouse Payments] debits against third party bank accounts."
     The Lindaus have used the bankruptcy process before in Massachusetts, having filed in 1993 for Chapter 7 bankruptcy with a slightly different spelling of their last name, Patricia and K. Morgan Lindeau, with discharge in October of that year. A discharge is a type of sentence given by a court with no imposed punishment.

"People need to know who these people really are”
     "People need to know who these people really are," says George Lambos, the owner of Fresco's Malden Inc., a restaurant in Malden, Mass., who has filed a lawsuit against the Lindaus and their payroll company. When he opened his business in 2016 he hired Northeast Abacus as its payroll company on the referral of his uncle, who had used the company.
     "It's sickening," Lambos says of the situation. He's paid $50,000 so far on $130,000 payroll tax liabilities to the IRS and Massachusetts incurred through the Lindaus' payroll company. He's afraid he'll have to take out a loan to pay back the rest.
     The strangest part of all, Lambos is beginning to realize, is that he has no idea what Patricia Lindau looks like. He never actually met her in person and knew her as Patricia Carr. "She claimed to have hundreds of employees and thousands of clients," he says. He would try to set up a meeting with her either at his restaurant or at what he thought was her business location in Newburyport, Mass., indicated by the business address used in her correspondence, but he explains she always had an excuse: back surgery, heart surgery or illness. "I trusted her," he says. He only found out that her name was Patricia Lindau and that she operated the business with her husband, Kjell Morgan Lindau, when he was contacted in June by Bangor attorney Joseph Baldacci, who told him that Patricia Lindau was intent on making right of the situation. Lambos says, "The next thing you know, she's filing for bankruptcy."
     When Lambos hired Northeast Abacus, he followed its recommendation to allow it to make direct withdrawals from Fresco's bank account so that Abacus could issue payroll checks. Abacus was also responsible for withholding and paying federal and state taxes. In his lawsuit, Lambos states that Abacus stopped paying some or all of Fresco's federal taxes while continuing to withdraw the funds from Fresco's bank account.
     In June 2017 Fresco's received a notice from the IRS indicating that it owed $20,000 in taxes. Lambos contacted Lindau, who responded by saying her guess was "that it is a CP, or computer generated, notice, which is indicated in the upper right hand corner of the letter." She explained that such letters could be ignored because the CP stands for computer processed, which she said meant there was a lag between when she sent out payment and when the IRS received it.
     However, Fresco's received additional notices from the IRS and the state that money was owed. In his lawsuit, Lambos states that he and Lindau spoke many times on the phone, and she assured him that all was well and no monies were owed. In one e-mail she responded with, "Thank you, George. You may disregard. There is no balance on account." Lambos moved his payroll to a different company in 2019. He remembers Lindau saying to him, "It's like losing a child," to lose his business, that no "male owned" business would take his call on a Saturday. He notes that they do. "She had no shame," he says, looking back.
     The notices continued and the reassurances continued, he states in his lawsuit, until he sent a final e-mail on April 29, 2020, when he had been in direct contact with the IRS. The court document states, "Even then, Ms. Lindau continued to try to keep up the charade, refusing to take responsibility and writing that she would 'make this a priority project.'" She "continued to insist that it was the IRS that was in error and that she had records with time stamps indicating that payments had been made." While this was unfolding, the lawsuit says that monies continued to be withdrawn from Fresco's bank account with Northeast Abacus falsely representing that the "funds were being forwarded to the appropriate government entities."

Local losses are small
     William "Bill" Schaefer, an artist and contractor in East Machias who worked for the Lindaus on 75 Water Street over the last year, feels relatively lucky that just a few hundred dollars are owed on his work, although he'd prefer to be paid in full given that even a few hundred dollars can make a big difference in Washington County. When he learned of the foreclosure auction and the bankruptcy filing, he says he was shocked. "There was never any indication of any financial problems," he says. He was paid for his work in a timely manner until the end of May. "But then they stopped taking my calls," he adds, now understanding the reason why. He notes that the Lindaus had planned to have him move over to 73 Water Street for another project but then canceled in March, which made sense to him at the time because of the pandemic and its probable impact on the business environment.
     The City of Eastport has seen only a small loss related to the two buildings. Tax Assessor Robert Scott reports that all real estate taxes are paid to date, although a total of $350 is owed in sewer fees on the two buildings.

Bank battles for collateral
     Over $1.28 million is owed by the Lindaus to the 20 largest creditors, ranging from $217,550 to Thorntons Companies, a restaurant in Massachusetts, to Roof Systems of Maine in Bangor for $25,000 still owed on roof work done recently on the Eastport buildings. Also included was a $25,000 Paycheck Protection Program loan made to the Lindaus' company in April.
     Not included in the list are the six loans made by Camden National Bank totaling $788,450. They are: a $300,000 commercial loan made in 2016; a $184,000 commercial loan made in 2017; a home equity loan made in 2017 for a maximum principal amount of $176,000 with the Newburgh house as collateral; a $75,000 commercial loan made in 2018; and a $53,452 commercial loan made in 2019.
     The Lindaus purchased 73 Water Street in June 2003 for $185,000 from Karen Mason, who had owned the building since 1987, when she purchased it for $100,000. In August 2003 the Lindaus purchased 75 Water Street for $235,000 from Manfred Zorn, who purchased the building in April 2003 for $190,000 from Leibro Inc., a company owned by former Eastport developers Porter Leighton and Darryl Brown. Leibro had purchased the building in March 1989 for $45,000. According to Scott, the Lindaus changed their two deeds in 2016 from Patricia and Morgan Lindau to Water Street Eastport Realty Trust.
     Camden National Bank states in its court filing that in early May of this year clients of Northeast Abacus alleged that the company had made unauthorized debits against their accounts. The bank contacted the Lindaus, "but after an initial response, the company went 'dark' and did not communicate further" with the bank, despite its repeated attempts. The bank states that the Lindaus acted by "surreptitiously transferring all the assets of the company and the realty trust to themselves personally and then immediately commencing a Chapter 11 proceeding for which they were ineligible." When the bank raised dismissal or stay relief after the preliminary hearing, it says that the Lindaus then filed a motion to change from Chapter 11 to Chapter 7 bankruptcy.
     The bank was asking the court to dismiss the Lindaus' Chapter 11 case, their move to change from Chapter 11 to Chapter 7 bankruptcy status and to allow the bank to proceed with the auction of the 73 and 75 Water Street properties.
     Court documents filed on behalf of the Lindaus state that their reason for attempting to stop the foreclosure auction by the bank was to "maximize the value to creditors" from the sale of the two Water Street buildings in Eastport as well as their home in Newburgh and "to make payments to debtors' creditors over the next three to five years from debtors' disposable income. That is a worthy goal in any reorganizing bankruptcy case."
     The bank stresses that the debtors -- the Lindaus -- are actually three separate estates and that the court should "condition any future filings by the debtors [Lindaus], the realty trust and the payroll processing company on separate filings rather than a consolidated one," and that only a dismissal ensures "that any attempt to scramble together the estates -- whether in Chapter 7 or Chapter 11 -- will be subject to the high bar required for substantive consolidation under applicable law."
     Most creditors in the bankruptcy filing, the bank states, "have claims stemming from the now shuttered payroll processing business," which the bank points out is not a licensed payroll processor in Maine, a state requirement that also requires it be insured and bonded. Failure to comply with the state law on licensing carries civil and criminal liabilities.
     Unlike most of the creditors, the bank said it "has clear and direct contract claims against the individuals." However, if the court decided to change the bankruptcy status, the bank asked that it be granted "stay relief" to proceed with the foreclosure of the real estate collateral before the case was converted. "Any other result would reward the debtors' continued bad acts by giving them exactly what they want -- to stay the lender's foreclosure sale." The bank suggested that the reason the Lindaus were seeking to convert to Chapter 7 was expressly for the purpose of stopping the foreclosure sale.
     However, on July 6 the court ordered the Lindaus to proceed as a Chapter 7 case, with all parties, including Camden National Bank, agreeing that conversion to Chapter 7 "is in the best interest of creditors."
     The auction of the 73 and 75 Water Street appears to be proceeding. The auction company had canceled the open house for potential buyers to inspect the premises on June 29, but was able to offer inspections on July 7, with about 20 people viewing the buildings.
     Attempts were made to contact Patricia Lindau, the Lindaus' attorney, James Molleur, and the lawyer representing Camden National Bank, Jeremy Fischer. No responses were received by press time.