Ky. family responds to lumber suit

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Defendants deny fraud in $4.1M action brought by company's insurer

By Sally Voth -- svoth@nvdaily.com

HARRISONBURG -- Three members of a Kentucky family being sued in U.S. District Court for more than $4 million by American Woodmark's insurer deny any wrongdoing.

St. Paul Fire and Marine Insurance Co., which represents the Winchester firm, filed a complaint last September demanding $4.1 million from Herbert H., Melanie Ann, and James Robert "J.R." Wesley Hoskins, all of London, Ky., according to online court records.

The lawsuit says that Herbert Hoskins was a lumber manager for an American Woodmark plant in Hazard, Ky., between June 2002 and April 2008. He started buying lumber for the company from Kentucky Lumber in October 2005 at an above-market price, the suit says.

"Unbeknownst to American Woodmark, Kentucky Lumber was owned and operated by Herbert Hoskins' wife and son," it says.

The complaint says that American Woodmark paid about $3 million for lumber with a market value of $2.7 million, or about $300,000 too much.

It also accuses Herbert Hoskins of stealing scrap material from American Woodmark's plant in Hazard, Ky. He was to sell it to local buyers, but instead got the company to give it to Bluegrass Wood Products for little to no cost. That company was owned by his wife, Melanie, and son, J.R. Hoskins, the suit says.

His wife signed contracts for Bluegrass under the alias of Ann Burnett, it says.
Bluegrass then sold the scraps to P.J. Murphy Forest Products Corp. for $20 a ton, coming to about $1 million over five years, according to the complaint.

Herbert Hoskins was fired after American Woodmark received an anonymous letter saying Melanie Ann Burnett was his wife.

The defendants filed answers to the complaint on July 1, seeking the dismissal of the lawsuit, according to online court records.

In his response, Herbert Hoskins says he did not act in agreement with his co-defendants.

"Defendant states that he did not overpay his wife," the answer says. "Defendant states that he did not convince his boss to give away the lumber scrap."

Melanie Ann Burnett filed on behalf of Bluegrass Wood Products and Kentucky Lumber Sales. She denies that American Woodmark was defrauded, and states that the plaintiff was actually in the wrong.

"Defendants state that there is no overpayment for any lumber and that American Woodmark owes Kentucky Lumber for lumber taken and not paid for," Burnett's response says. "Defendants state that American Woodmark broke the sawdust agreement and destroyed Bluegrass's relationship with PJ Murphy."

Counsel for both sides met on June 20, according to a joint report and discovery plan filed on July 15.

"The parties have discussed the possibility for settlement and resolution of this case, but have not been able to come to a mutually agreeable settlement at this time," it says.