Las Vegas judge denies former operator of failed Midland dam attempted bankruptcy filing

The former operator of Boyce Hydro and the Edenville Dam, which failed when record rains hit mid-Michigan in 2020, has lost his attempt to declare bankruptcy and avoid paying a $120 million judgment for his role in the catastrophic flooding.

According to a news release Thursday from Michigan Attorney General Dana Nessel, a judge with the U.S. Bankruptcy Court in Nevada, the home state of Boyce operator Lee Mueller, dismissed Mueller's attempted bankruptcy filing.

The attorney general's office did not immediately respond to a question from the Free Press on how this ruling would impact the state's attempt to recover the money from Mueller, and whether it would offset the costs of repairs - which some homeowners say will cost them their property.

The judge, August B. Landis dismissed the bankruptcy petition last month, after concluding in a February hearing that Mueller's effort "smacked of bad faith," according to a news release from the attorney general's office.

In 2023, the state obtained a nearly $120 million judgment against Mueller for his role in the catastrophic failure of the Edenville Dam.

“Mr. Mueller has repeatedly made inaccurate representations to two different courts in his attempts to evade accountability and money judgments for his responsibility for the Edenville Dam disaster,” said Attorney General Dana Nessel in a statement.

"I am grateful that the courts have continued to see through Lee Mueller’s obvious attempts to manipulate these proceedings in order to protect himself at the expense of the thousands of Michigan residents whose lives he’s devastated,” Nessel said.

Four dams and lakes in Gladwin and Midland counties were damaged by record flooding of the Tittawabassee and Tobacco rivers in May 2020. In addition to the Edenville Dam and Wixom Lake, the other dams and lakes that were damaged were Sanford Dam and lake, Secord Dam and lake, Smallwood Dam and lake. Hundreds of homes were also damaged.

According to the attorney general's news release, eligibility for a Chapter 13 bankruptcy case, which is what Mueller sought, requires that a person's debts do not exceed $2.75 million.

Mueller swore in his petition that the amount of his debt owed to the State of Michigan was “unknown,” contending it should not be counted toward his eligibility limit. The Michigan Attorney General's office asked the Las Vegas bankruptcy court to dismiss the case, arguing that Mueller had filed in bad faith, with full knowledge by the time of his filing that his debts would far exceed the Chapter 13 bankruptcy eligibility limit.

The court held that Mueller's refusal to "fully disclose facts that were known" to him was a fairly transparent attempt to manipulate the court.

The court concluded that Mr. Mueller’s untrue statements were “the kind of egregious behavior that warrants a finding of bad faith” and dismissed his case.

Nessel's office said this marks the second federal court to find Mueller had used the court system in “bad faith” after the U.S. District Court for the Western District of Michigan concluded as much in a ruling to uphold sanctions against Mueller.

The flooding caused millions of dollars in damages to the four lakes and dams. The four dams had been privately owned at the time of the flooding. The Four Lakes Task Force, local citizens acting on behalf of Gladwin and Midland counties, acquired the dams through condemnation and is overseeing repairs and finances.

The Free Press reported earlier this month that those repairs had been put on hold while some homeowners challenge proposed special assessments: $8.8 million for operations and maintenance over five years, and $217.7 million for capital costs over 40 years.

A lawyer for some of the homeowners protesting the costs in Midland County Circuit Court told the Free Press the costs of the assessments is so high some homeowners would be crushed financially and could lose their propery. The lawyer argued the special assessments amount to an unconstitutional taking of property without due process or just compensation.

Contact Jennifer Dixon: jbdixon@freepress.com

This article originally appeared on Detroit Free Press: Judge tells former operator of failed dam he can't file bankruptcy