, Gloucester, MA

June 13, 2013

Man held for wage non-payment is in bankruptcy

By James Niedzinski
Staff Writer

---- — MANCHESTER — The Manchester man arrested earlier at his $2.5 million home this week for allegedly failing to pay $90,000 in wages to employees of his Connecticut-based company is bankrupt and owes nearly $14 million to more than 40 creditors, court records show.

John F. Gallagher was arrested on a warrant from the Connecticut Department of Labor and was arraigned Tuesday in Salem District Court on a fugitive of justice charge. And Gallagher, who is being held in Middleton Jail awaiting until he’s retrieved by Connecticut authorities, also has ties to a Medicaid fraud case in that state, according to the Connecticut Office of the Attorney General.

But records also show that Gallagher filed for Chapter 11 bankruptcy in 2009, and 41 creditors have filed claims totaling $13,871,371, including general unsecured claims, according to bankruptcy court documents.

“I stopped spending time on it, it was a losing battle,” creditor John Bennet of Cape Ann Professional Engineers in Manchester said Wednesday.

Bennett said he performed topography work and septic system plans for Gallagher sometime before 2009, as he was planning to divide his property on Old Wenham Way. He estimates Gallagher’s invoice is about $20,000, which he has not received.

Bennett did not file a claim seeking as his name or business is not listed in the claim file, but others have.

According to the documents, his creditors range from electrical companies in Vermont to financial institutions, companies and even municipalities in Delaware, Kansas, Texas and beyond.

Jason Lavallee of the Connecticut-based Lavallee Construction said Gallagher still owes him money for excavation work done on a property in Columbia, Conn., in 2008.

“I’ve only had to sue one person in 12 years, and it was him,” Lavallee said.

Lavallee said he did see some of the money returned to him, as he was initially owed around $30,000, he said.

The most recent creditor’s filing came in April of this year, by Bank of America, which is seeking $260,977.

Gallagher serves as a president and treasurer of a number of mortgage and management companies, according to Secretary of State fillings.

State documents indicate Gallagher operates Gallagher Mortgage Company, Inc. out of his home in Manchester, a company once called East-West Mortgage Company Inc.

The Worcester Telegram and Gazette reported that in 2010 the former CEO of East-West agreed to pay $150,000 in alleged violations of regulations and unsound banking practices. Gallagher told the Worcester paper that the Federal Deposit Insurance Corp. allegations were about compliance issues after the mortgage company was purchased by a bank. He also said the charges amounted to selective enforcement.

According to the website, Gallagher is still in the rental business. The company rents out vacation homes on the island of St. Marteen in the Caribbean, as well as in Stowe, Vt., and in New Hampshire and Maine. An employee who answered the phone at the company’s offices Wednesday declined to comment on the story.

According to a court document filed in April of last year, the bankruptcy court does have a repayment plan in place. The filing calls for Gallagher to contribute his disposable income from his rental properties for five years from the effective date of the plan. But the filings were unclear as to how much, if any amount, Gallagher has paid his creditors.

James Niedzinski can be reached at 978-283-7000, x 3455 or at