Lexington Blue update: AG wants bankruptcy dismissed, expands fraud case
AI-generated summary reviewed by our newsroom.
- Attorney General plans to seek bankruptcy dismissal to continue fraud suit in state court
- Lexington Blue accused of misleading court, owing more than $3.2 million listed
- Federal and state agencies oppose the company’s reorganization and notification plans
Kentucky Attorney General Russell Coleman plans to file a motion asking for the dismissal of Lexington Blue’s bankruptcy so the state can pursue further legal action against the company and its owner.
“Lexington Blue’s bankruptcy action is a strategic delay tactic that unnecessarily hinders Kentucky’s ongoing enforcement efforts against Lexington Blue and Brad Pagel in state court,” Coleman’s office said in a federal bankruptcy court filing this week. “Dismissal of this proceeding is not a mere procedural preference — it is essential to protecting the public interest and safeguarding vulnerable consumers.”
Coleman’s office asked the court to set a date for a hearing on the request to dismiss, but Coleman had not filed a motion to dismiss as of Thursday afternoon.
A required meeting of all creditors is planned for 2 p.m. July 18 via telephone. To participate, call 888-330-1716 at least five minutes in advance; participant code is 4835137.
Coleman’s request comes after his office filed a consumer protection case against Lexington Blue and Pagel in May following a Herald-Leader investigation that revealed multiple homeowners said Pagel had conned them out of thousands of dollars for roof work that was never done, and former employees said Pagel ran the company as a cult of personality.
The civil case is ongoing, and on Monday, Fayette County Circuit Judge Dianne Minnifield granted a temporary restraining order freezing the assets of Pagel, Lexington Blue, former chief operations officer and director Alex Southwell and several of Pagel’s other business entities.
The attorney general has since expanded that asset freeze to Pagel’s wife, Courtney, who apparently has been paid by Lexington Blue despite not working there, as well as former office manager Brooke Durbin, former director of finances Nicholas Conway, and a shell company of Brad Pagel’s called Nowhere 1888.
Pagel filed for Chapter 11 bankruptcy in June. He says he no longer lives in Lexington and listed a Pensacola, Fla., drop box as his mailing address in the bankruptcy.
On Tuesday, U.S. Bankruptcy Judge Gregory Schaaf heard testimony from Pagel and Lexington Blue’s attorney, J. Christian Dennery, about plans to create a special website and a limited process to notify creditors of case activity. Lexington Blue has also floated a plan to assign unfulfilled roofing contracts to willing bidders who could take on the work.
Both Coleman’s office and the U.S. Trustee’s office opposed these plans as unworkable. Schaaf ruled against the website notification plan on Wednesday, so Lexington Blue will have to continue notifying all parties via mail.
According to Lexington Blue, at least 263 creditors are owed $3.2 million.
But Coleman’s office said in a court document that their investigation has heard from homeowners who are not listed among the creditors in the bankruptcy and the attorney general alleges that Lexington Blue may owe nearly $5 million to homeowners for incomplete 2024 roofing contracts.
Coleman’s office also said that Lexington Blue misled the court about how much money it had already received from former customers — who the AG’s office said would “more aptly be referred to as victims” — by more than $300,000.
And more creditors are coming forward with claims, according to documents filed with the bankruptcy court:
▪ The Equal Employment Opportunity Commission in Cincinnati has filed a claim against Lexington Blue for $1.15 million, including a secured claim for more than $12,000 for wages, salaries or commissions earned within the last six months.
▪ Burton Properties, Lexington Blue’s landlord for the office on Pasadena Drive, filed a claim for $15,450 in unpaid rent.
▪ The IRS filed a claim for more than $12,000, including more than $9,000 owed on employees’ federal income tax payments.
Meanwhile, two new lawsuits have been filed: Kentucky Farm Bureau Mutual Insurance Company has filed at least two complaints in Fayette Circuit Court against Lexington Blue involving homeowners who paid for but never got roofs. One is owed more than $10,000, another more than $15,000.
