photo by: Elvyn Jones/Journal-World

A string of unused coal cars are parked on Midland Railway tracks from just outside of Baldwin City. The cars, which prevent resumption of tourist excursion rides, are likely to remain on Midland tracks because their being parked there provides revenue.

The leader of a Baldwin City company that once operated a popular tourist railroad business in southern Douglas County has left the company as lawsuits regarding his leadership mount.

After four tumultuous and litigation-filled years, A.J. Stevens has left Midland Railway and its for-profit arm, Leavenworth, Lawrence & Galveston Railroad Company.

Stevens’ resignation came after the Midland Railway Historical Association’s board of directors filed a January lawsuit in Douglas County District Court asking that Stevens be removed as president of the LL&G, that the LL&G be placed in receivership and that stock transfers be rescinded that gave Stevens control of 50% of LL&G shares.

Douglas County District Court records show that Judge Mark Simpson granted the request for a temporary restraining order barring Stevens from continuing to carry out LL&G business or financial activities. The historical association’s attorney Terry Leibold said Simpson put the receivership request on hold because “Mr. Stevens is no longer associated with Midland Railway Historical Association or Leavenworth, Lawrence & Galveston Railroad Company.”

The association’s board is now handling the financial responsibilities of the LL&G, Leibold said. Attempts on Monday afternoon to reach Stevens for comment were unsuccessful.

Stevens, a past Baldwin City councilman who unsuccessfully ran as a 2018 Democratic primary candidate for the Kansas House of Representatives, first became executive director of Midland Railway four years ago. He gave up that position when the Midland Railway Historical Association board appointed him president of the LL&G. That for-profit short-line railroad was established in 2019 after Stevens successfully obtained federal authority to use the Midland tracks for freight transportation.

Under Stevens’ leadership, Midland’s popular tourist excursion train rides out of Baldwin City ended with the start of the COVID-19 pandemic in March 2020, and the LL&G depends on the parking of unused coal cars on its tracks south of Baldwin City for its revenue. The lawsuit says the parked coal cars have netted the LL&G as much at $90,000 to $95,000 a month.

Midland Railway and the LL&G have been embroiled in numerous lawsuits during Stevens’ time with the railroads. Most notable of those is a still-active lawsuit that Baldwin City government filed in November 2020, seeking to recover a city-arranged $321,000 loan that the LL&G received in February 2020 through a Kansas Department of Commerce program. The city’s suit alleges that Stevens failed to provide a required accurate accounting of how the loaned money was spent. In a second significant legal action, Rail Events Inc. of Durango, Colorado, filed suit in La Plata County, Colorado, District Court, seeking to recover payments due the company on tickets sold for Polar Express rides offered during the 2018 and 2019 holiday season and Peanuts-themed rides offered in association with various holidays.

The Journal-World reported in December that the La Plata County, Colorado, District Court had approved a settlement agreement in Rail Event’s suit that required LL&G to make monthly payments and pay legal fees, but did not have dollar amounts because the settlement was sealed. The historical association’s lawsuit states the judgment for Rail Events was for $404,506, plus $53,908 in legal expenses. The settlement is to be paid off with monthly payments of $28,171.

Among the reasons cited in the suit in support of Stevens’ removal from his positions and the naming of a receiver are:

• Stevens’ failure to pay employee withholdings due on federal and state employee income taxes, FICA and U.S. Railroad Retirement Board, although those sums were deducted from employee paychecks.

• Stevens’ refusal to share with the historical association’s board or its representative any LL&G financial records or allow access to a laptop presented to him for business purposes.

• A current felony forgery charge against Stevens in Douglas County District Court alleging that he wrote a check on a Baldwin City homeowners association account to the LL&G. That case remains active in Douglas County District Court.

• The alleged failure of LL&G to pay the historical association 4% of its gross revenue owed as part of a 2019 management and operating agreement, in which LL&G leased Midland’s assets to operate.

• The repossession of four passenger railcars. The suit alleges that Ben Butterworth, of Indiana, took possession of the cars in December 2021 because Stevens didn’t make promised payments as agreed when they were delivered two years earlier. The suit alleges that Stevens told the historic association board that the passenger cars were being returned because one of them was stolen.

• Fiduciary mismanagement that led to lawsuits, including those of Baldwin City and Rail Events cited above and that of the Santa Fe Trail Historical Society, which the lawsuit alleges stemmed from Stevens’ failure to make lease payments.

The lawsuit also asks the court to rescind past LL&G stock purchase agreements that give Stevens control of 50% of the LL&G’s stock. The board approved a series of stock purchase agreements to Stevens starting in February 2020. The first transferred 30% of LL&G’s stock to Stevens at no cost. A second transferred to Stevens’ control at no cost another 19% with those shares to be distributed to LL&G board members, employees and its legal counsel within five years. The lawsuit notes that no shares have been transferred to those parties, and instead Stevens has retained them for his own benefit.

The suit also states that the board amended the second purchase agreement in February 2021 to increase the percentage of stocks in the purchase agreement from 19% to 20%. The suit alleges that Stevens requested the additional 1% because he had negotiated a settlement with Rail Events for the money the Baldwin City railroad owed the company, which required him to personally guarantee the settlement.

The board suit alleges that the real purpose for the added 1% was to give Stevens control of 50% of LL&G’s stock. “MRHA is not aware of any personal guaranty signed by Stevens as part of a settlement with Rail Events Inc. and upon information and belief, Stevens misrepresented the fact that Rail Events Inc. required a personal guaranty to be signed by Stevens for the purpose of inducing the MRHA to convey a total of 50 percent of the shared in LL&G to Stevens,” the filing states. Simpson has not ruled on the stock requests.

Future operations of Midland and its for-profit LL&G remain unclear. Journal-World phone calls and text messages to the historical association’s board president Tim DeMott, of Baldwin City, asking about plans to renew tourist excursion rides went unanswered.

Bruce Eveland, owner of the Kansas Belle Dinner Train that offered rides on the Midland tracks until March 2020, said he has had conversations with board members about resuming operations of the Kansas Belle, an activity that also makes use of Midland-owned locomotives.

Eveland said that Kansas Belle can’t operate until enough of the coal cars are removed from Midland tracks to allow tourist trains access to Norwood, a site about five miles south of Baldwin City that has a second set of tracks that allows locomotives to separate from the front of passenger cars and then recouple on the rear for a trip back to Baldwin City. It’s obvious the MRHA board will have to keep enough coal cars parked on its tracks to cover obligations of its existing settlement agreement, he said.

Those settlement obligations could increase. Baldwin City Administrator Glenn Rodden said the city would continue to pursue its suit in Douglas County District Court seeking to recover the $321,000 loaned to the railroad, plus legal fees.

The city is not responsible to repay the loan but is obligated to aggressively pursue legal action to recover the money, he said. The loan did require that Midland put up railroad equipment as collateral.

“We’re going full speed ahead,” he said. “Our obligation to the Department of Commerce is to make a good-faith effort to recover the money, and that is exactly what we are doing.”