PORTLAND — The state’s highest court has upheld a lower court decision regarding a divorce judgment involving a Southwest Harbor lobster business and other assets.
Timothy Harper was appealing a 2016 judgment entered in the state’s Business and Consumer Docket that found he had “engaged in economic misconduct” with the result that the marital estate was deprived of “at least $800,000 from what should have been shared income,” according to court records. The Maine Supreme Judicial Court affirmed that judgment in an Aug. 1 decision.
Timothy and Sheryl Harper were married in 1978 and went on to own several businesses, two of which were involved in the appeal. Northeastern Seafood Inc. is a lobster business operating from a wharf in Southwest Harbor, and The Dictator Inc. is a corporation that owns the fishing vessel Dictator. Timothy Harper is the sole shareholder in the latter corporation, according to the court.
Timothy Harper began managing Northeastern Seafood sometime between 1997 and 2005. He began a series of operational changes that included implementation of a second, and separate, bookkeeping system, elimination of credit card processing and making a decision to sell to only two commercial lobster buyers, according the court.
“Timothy removed the credit card systems for the purpose of retaining cash that [the business] received for retail lobster sales without recording it as corporate income,” the decision states.
Additionally, he opened and drew down lines of credit that, at the time of the divorce proceeding, which began in January 2013, had an approximate balance of $350,000.
“This was in stark contrast to Sheryl’s management of the company; when she gave up control of the business, [Northeastern Seafood] operated with limited debt and substantial cash reserves,” according to the decision.
Dictator and its associated fishing permits have a value of $4.5 million, according to the court. Between 2012 and 2015, Timothy Harper used funds from operating accounts to buy vehicles for his personal use. “he also used Dictator income to pay himself year-end bonuses of $150,000 and $200,000,” the decision states.
In affirming the Business and Consumer Docket decision, the Supreme Judicial Court found there is “competent evidence in the record” to support the judgment. The changes implemented after Timothy Harper took over Northeastern Seafood “had a detrimental impact on the marital estate and Timothy provided no legitimate business purpose for instituting them,” according to the court. With Dictator, there are “voluminous records containing evidence of ‘largely undisputed transactions’ through which he unreasonably diminished the value of that marital asset.”
In his appeal, Timothy Harper was arguing that Sheryl Harper was required to “trace the misappropriated funds into the hands of third parties.” The court found otherwise, stating there was ample evidence detailing these transactions.
Timothy Harper also was arguing that the Business and Consumer Docket abused its discretion in ordering him to reimburse Sheryl Harper for $50,000 in legal fees and the appointment of a “referee” to oversee the couple’s business interests. The Supreme Judicial Court disagreed, stating that a court can award attorney fees in a divorce proceeding if the conduct of one party prolongs the proceeding unreasonably and the appointment of someone to oversee distribution of business assets is allowable under state law.