Former Medford councilor named in lawsuit on Owatonna

MEDFORD — Dan Niles, the Medford City Council member who resigned abruptly this week, has been named in a lawsuit that claims he took money from the Niles-Wiese Construction Company, set up a second company to which he diverted projects and blackmailed employees who got suspicious of his activities.
Niles submitted a letter to the Medford City Council announcing his resignation Monday. The letter offered little explanation for his hasty departure. In it, Niles stated simply that, “Due to reasons of a personal nature, I do not feel I can effectively serve as a council member.”

Niles had held the post for just over a year, less than half of his four-year term.
Earlier this month, Niles was sued by his business partners, Gary Wiese and Joseph White, both key members of Niles-Wiese Construction and its affiliate Tri-County Aggregate, Inc. Niles-Wiese is a well-known firm that has frequently done work for the City of Owatonna. The company was the main contractor during the construction of the crosswind runway at Owatonna Degner Regional Airport. Niles-Wiese also worked on River Springs Water Park, which was completed in early summer of 2009.
Niles is the president of Niles-Wiese. He also holds 50 percent of the company’s shares. Wiese, the vice president, holds the other 50 percent. White is a shareholder in Tri-County, according to court documents.
In the complaint filed on Dec. 10, Niles’ partners allege that he has “acted fraudulently” and “illegally” in his capacity as president and shareholder.
According to the complaint, Niles allegedly “converted corporate monies for his personal enrichment, without knowledge of Wiese and White,” and “wasted and misapplied corporate funds of Niles-Wiese and Tri-County” by writing himself checks from the corporate account and directing “at least one” debtor to make payments to him directly. They also accuse Niles of “wrongfully transferring corporate funds between companies in order to secure various personal outstanding loans.”
The two accuse Niles of falsely represented the company’s financial standing, telling them that Niles-Wiese was “on the verge of financial ruin” and urging them to declare bankruptcy in order to hide evidence of fraud.
Wiese and White further allege that Niles formed a competing company with co-defendants, former employee David Arndt and Wiese’s sister Kim Rosenau — Steele County Construction Companies, LLC., which was incorporated on Dec. 5, 2009. In the suit, the two accused Niles of siphoning off business contracts and leads and directing them to the new company.
Niles’ business partner also stated that he allowed Rosenau and Arndt to use equipment owned by Niles-Wiese in their own operation, K & D Companies.
“This usurpation has caused money loss,” the complaint states. “Niles has done this intentionally and in bad faith.”
In a bizarre twist, White alleges in an affidavit that Niles had installed “aggressive spyware” on the company’s computers, allowing him to read all the employees’ private e-mails. White claimed that Niles threatened to expose aspects of Project Manager Beth Brady’s personal life if she outed him.
Wiese and White asked the court to strip Niles of his authority in both companies and to deny him any buyout on the grounds that “the value of the corporate funds, property and opportunities which Niles has wrongfully converted for his personal gain exceed the value of his ownership interests.”
Neither Niles nor Wiese could be reached for comment on Tuesday.

Clare Kennedy can be reached at 444-2376.

To view the first amended complaint, click here.
To view the affidavit of David Arndt, click here.
To view the affidavit of Joseph White, click here.
To view the temporary restraining order, click here.

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Member Opinions: By: JaneDoe on 12/23/09 Oh what a tangled web we weave, when first we practise to deceive! -Sir Walter Scott By: daycare_mom on 12/23/09 Paul98, you are out of line, and if I knew which business you owned I would not do business with you anymore, keep your slanderous comments to yourself. By: auggerman22 on 12/23/09 ouch...sorry to hear paul98...Daycaremom maybe you should watch what you write! By: centuryfarm on 12/23/09 I recently thought about starting my own business with a friend. After reading about this and Oakridge Builders I may make more money as a WalMart greeter. How unfortunate business partners destroy their friendships over greed. By: maryjo on 12/23/09 I'm sorry to hear about that, paul98. I will not be frequenting that establishment. By: iowafan on 12/23/09 Wow Niles has a full plate for the court system coming up, he hasnt even gone to court yet for beating the living crab outta guy @ a local bar back in march.