Kelm's Milk

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U.S. lost $50,000 in Anderson Aide's firm

Minneapolis Tribune 

By Bernie Shellum Staff Writer

The federal government has lost more than $50,000 d of its indirect investment in Polar Panel Co., the now-defunct firm that Tom Kelm used  three years ago as a source of credit and jobs for DFL campaigners.

Figures provided by the tax-supported Small Business Administration (SBA) .,, put the loss at $52,496.

The Montgomery, Minn., corporation filed for bankruptcy on July 13, 1971, about 13 months after Kelm left its day-to-day operations to manage Wendell Anderson's gubernatorial campaign and 8 months after he resigned from Polar Panel's presidency to become the governor-elect's chief of staff.

(Kelm says his leaving did not hurt Polar Panel. Page 5A.)

The SBA funneled a total of $294,000 into Polar Panel through the Montgomery Industrial Development Corp. (MIDCO) in two loans.

The first loan for $240,000, was granted on Feb, 1968, just 15 days after receipt of Polar Panel's application at the SBA district office in Minneapolis.

Corporate directors learned, in a personal telephone call from then Vice-President Hubert Humphrey that officials in Washington, D.C., had approved the loan. Humphrey and Tom  Kelm's father,  Elmer Kelm, were principal architects of the political merger that formed the Democratic-Farmer-Labor Party in 1944, and the friendship and alliance had continued for a quarter-century.

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was as follows:

Kelm had resigned as president on Nov. 20, 1970, but remained on the corporate payroll, at $32,160 a year, through December, and had his Blue Shield premium paid by the company during his first four months with the Anderson administration in 1971.-C

The other stockholder directors had ordered an audit, which had turned up the first in a series of f i n a n c i a I irregularities that later resulted in a civil court suit and an out'of-court settlement that Lost Kelm $13,000.

What had been reported to the directors as a 1970 net__pr~ of $15,400__W Sept. 30.,-had become, onKelm's departure, a loss of almost, $65,OOQ.

During the 1970 political campaign Kelm had provided Polar Panel credit cards or other corporate credit to two statewide candidates - Anderson and Jon Wefald - and to several DFL campaigners.***

sequent $54,000 loan. After liquidation, a total of $67,219 still was owed on those two loans.

In addition, $57,074 still was owed to the Montgomery bank on a separate loan taken out Jan. 31, 1968, that did not involve the SBA.

The bank was sold by Kelm and the other majority owners on Oct. 10, 1969, to Larry Morgan, the current president.

When asked about his loss, M o r g a n said last week, "It wasn't anything staggering."

*** Must get complete text

As president of Polar Panel, Kelm invested $15,000 in corporate funds - the legal maximum - toward the $60,000 goal.

Later, the other directors discovered that an additional $11,000 had been borrowed from two Kelm owned banks and invested in the MIDC0 project, $1,000 came from the Montgomery bank and $10,000 from the First National Bank of Navarre.

The loans were taken out by Theodore Mellby, a Montgomery attorney who served as local counsel for Polar Panel, and were cosigned by Kelm. Until June 30, 1969, Kelm also was part of a group that held majority interest in the Navarre bank.

The $1,000 and $11,000 loans did not come to the attention of Polar Panel's directors until March 1971, when Mellby presented to the corporation a legal services bill for $504.