BANGOR (AP) – The former owners of bankrupt Great Northern Paper Inc. are responsible for paying back more than $3 million in loans to Katahdin Federal Credit Union in Millinocket, a state judge has ruled.

Superior Court Justice Jeffrey L. Hjelm ruled Lambert Bedard and Inexcon Maine defaulted on three loans from Katahdin Federal. He ordered payment of outstanding balances, plus interest, late fees and attorneys’ fees.

Hjelm’s ruling will not be final until the end of August, if there is no appeal.

Bedard and Inexcon Maine do not contest taking out the loans, but they believe they should not be the ones repaying the money, said their Portland attorney, Nicholas Walsh, on Tuesday.

Instead, the loans should be repaid from proceeds of the sale of Great Northern because Bedard and Inexcon Maine used the money to fund its financially strapped operations, he said.

Bedard, who was president of Great Northern and co-owner of parent Inexcon Maine, stepped aside in early February.

The loans were secured with Great Northern property transferred from the company to Bedard and Inexcon Maine after an affirmative vote by Great Northern’s board of directors in June 2001.

The property transfer was not noticed until attorneys for Great Northern’s bankrupt estate came across it last March when trying to sell Great Northern’s two mills in Millinocket and East Millinocket.

U.S. Bankruptcy Judge Louis H. Kornreich ordered the property transferred to Great Northern so the mills could be sold. He also put $3.6 million in escrow, and others will be fighting the credit union for a share of it.

Those include Boeing Capital Corp. of Long Beach, Calif., which was Great Northern’s primary secured lender. Three other creditors also are seeking payment from the escrow account.

AP-ES-07-30-03 1041EDT