Elderly couple’s assets tied up in legal battle

Posted: Sunday, September 03, 2006

Editor’s note: This is the second in a series of articles involving a possible arson fire in Sterling, questionable business practices by a home builder and the alleged swindling of millions of dollars in property from an elderly Sterling couple.

As far back as 1879, when two families homesteaded together in the Dakota Territory, the Thompsons and the McDowells have had a history.

Now, however, removed by several generations, the families are together again, but their current reunion is being held in Alaska Superior Court.

Their dispute involves ownership of Alaska property valued in the millions.

The situation that brought ownership into question centers on three lots on the Kenai River just up from Bing’s Landing and on a former fish processing plant in Sterling — the site of a recent fire of suspicious origin that destroyed a prefabricated log home-building business operating out of the old plant.

Sam McDowell purchased the fish processing plant property in the early 1980s.

According to his wife, Joyce, Sam had always paid cash for land he acquired in many areas of Alaska, but this time, he took out a $500,000 bank loan for the purchase.

What he didn’t know at the time was the land beneath the fish plant was contaminated. Some of the contamination reportedly came from the fish plant itself, some was arsenic in the property’s well and some, according to Joyce McDowell, was gasoline that had leaked from the Tesoro gas station across the Sterling Highway.

When Sam McDowell did find out, he immediately filed suit against the gas station, the Tesoro oil company and the state for not disclosing the contamination.

Joyce said the eventual trial in Kenai lasted a record-setting 4 1/2 months in 1989, and resulted in a $23,000 jury award for lost income from the fish plant and a $1 million punitive award mostly against Tesoro.

The awards were announced in 1999.

Tesoro appealed the award amount and, according to Joyce, nothing was settled until three months ago.

“I didn’t get anything,” she said. “After the attorney got his fee, the remainder was put into a trust ... I think administered by the state.

“Because of the contamination and no more income (from the fish plant), Sam had to start selling property to pay the bank, but he wasn’t selling it fast enough,” Joyce said.

First National Bank of Alaska placed a judgment lien against the McDowell properties in the amount of $249,243.23. Over time, an additional $77,782.40 in interest accrued.

“Sam always thought he would get enough from the court cases to pay off the loan,” she said, holding back tears.

Now 77 years old, Sam McDowell has been diagnosed with Alzheimer’s dementia and micro vascular cerebral ischemia, and is no longer capable of signing legal documents, Joyce said.

During the summer of 2002, according to court documents, Craig Walstad visited the McDowells at their home on the Kenai River just upstream from Bing’s Landing. Walstad’s wife, Joan, is Joyce McDowell’s second cousin.

“(Walstad) said, ‘I can help you get rid of the problems,’” Joyce said.

“I said my younger sister, Wanda, is helping us,” she said.

Joyce’s sister, Wanda Petitclerc, was working with her accountant to help the McDowells by forming a limited liability company named Genesis. The company would take title of the McDowell properties and present a plan to the bank to pay off the judgment by liquidating certain properties.

“Craig asked if I wanted him to call Wanda. I said yes,” Joyce said.

In October 2002, Walstad and Petitclerc came up with a plan.

“They said, ‘Tell us which properties you don’t want to sell,’” Joyce said.

Sam did not want to sell the Kenai River property — a house on three lots totaling 12.5 acres with 1,200 feet of river frontage.

Joyce did not want to sell the couple’s cabin on lower Summit Lake.

She said Walstad also identified a five-acre lot on Mama Bear Lake and a Gulkana River lot that should not be sold.

The four properties were to be put in the Genesis company and Walstad was to sell remaining properties to pay off the bank, according to Joyce.

In November 2002, Sam and Joyce entered into an agreement with Genesis conveying several properties — including the three lots upstream from Bing’s Landing — to Genesis in exchange for Genesis doing everything necessary to obtain assignment of the bank judgment.

By that time, Joyce said Sam had sold properties in Homer, paying $220,000 toward the bank’s judgment and the bank gave him a discount on the remainder, leaving $250,000 owing.

In a handwritten letter now in a court case file, Joyce states:

“Sam and I both understood from the outset of the business relationship that we would have no ownership or control over Genesis Properties or the properties we conveyed to it.”

“Craig said he paid $200,000 and Wanda paid $50,000,” Joyce said.

According to Joyce, Walstad later paid $50,000 to Joyce’s sister to get her out of the picture.

“I didn’t suspect at all what he was doing. We were all very good friends,” Joyce said.

“When I found out, I asked Craig, ‘So now you own all our property?’

“He said, ‘I don’t own it; Genesis does.’

“I said I didn’t want to sell the river property, and he said he didn’t sell anything,” Joyce said.

According to Walstad’s Kenai attorney Blaine Gilman, Walstad allowed Sam and Joyce to live on the Kenai River property and act as caretakers.

In the winter of 2004-05, the McDowells moved from the cabin on the river property because Joyce broke a hip and Sam was not able to care for himself. He went to live with their son, Dan.

Walstad then began a remodel project on the property, which was now owned by Genesis, and Dan did not approve, according to Gilman.

“I think he wanted to run his fish guiding business from there,” Gilman said. “He barred the gate and ran off the contractor.”

“Genesis filed an FED (Forced Entry and Detainer) to get back (Walstad’s) property,” he said.

Dan McDowell said his mother’s properties were signed over to “a distant relative” on quit claim deeds. He described the transactions as “elder fraud” and said a big lawsuit is pending.

Through Gilman, Genesis Properties LLC has filed a civil suit against the McDowells saying they deeded over a number of properties through warranty deeds, including the lots on the Gulkana and Kenai rivers, in consideration of Genesis’ purchase of the bank judgment for $268,243.

Gilman said Genesis has never claimed any ownership in the Sterling property that was occupied by the log-building business that burned down.

The judgment, which has been assigned to Genesis, now encumbers other McDowell properties with a $250,000 lien.

Gilman said Genesis has paid approximately $540,000 that can be directly attributed to the McDowells, including property taxes, attorney fees and preserving the judgment.

He said the judgment acts as a lien against all properties.

Attorney Charles Winegarden, who is representing the McDowells, said the civil case “is in the very, very early stages.”

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