Bankruptcy trustee to take over alleged Ponzi scheme company

Judge grants motion on behalf of investors in Terry Kretz's Hanover Corp., which took in some $18 million from churchgoers and others

Email | Print By E. Thomas Wood

Cornerstone Church, Madison, with which a number of principals and investors in Hanover Corp. have been associated

Hanover Corp., the Nashville company that has failed to account for much of the estimated $18 million it took in from parishioners of Madison's Cornerstone Church and other investors, is under new management as of today.

U.S. Bankruptcy Judge Keith M. Lundin this morning ordered that a trustee be appointed to take over Hanover's affairs. Ruling from the bench during a hearing, Lundin said the company "appears not to have lawful authority to conduct its business" and should therefore be placed under the court's administration. Attorney Steve Hurd of Sherrard & Roe, representing some of the investors in an involuntary Chapter 7 petition to liquidate Hanover's assets, had previously told the court that Hanover's license to act as an investment advisor lapsed at the end of 2005 and that it was not registered as an investment company.

Terry Kretz, the charismatic businessman who operated Hanover with the involvement of several Cornerstone members, was present in the courtroom but did not have a lawyer with him. Kretz addressed the court briefly to confirm that Hanover would not oppose the trusteeship. He and lawyers for the investors had reached agreement that he will be able to petition for the case to be converted into a Chapter 11 reorganization rather than a liquidation, though the attorneys did not agree to support such a motion.

Along with Hurd, attorneys Sean Kirk of Miller & Martin and sole practitioner Carter Conway took part in the hearing. Kirk represents Patrick and Lisa Reitmeyer, the Arizona couple who last month sued Hanover, Kretz and company official Bud Thorpe. Conway told the judge he now represents a total 40 of the roughly 150 people who invested in Hanover's promissory notes, which promised to pay 2 percent per month in guaranteed interest.

The Reitmeyers called Hanover a "Ponzi scheme" in their federal lawsuit over a $734,000 investment that Hanover has failed to repay. They dropped that legal action after the Chapter 7 proceeding was filed and instead joined in the bankruptcy case, asking the court for subpoenas to force Kretz and others to testify and produce evidence about where the money went. The judge granted that request, and a deposition of Kretz and Thorpe is scheduled for tomorrow at the offices of Miller & Martin in Nashville.