Civil action was taken to hold Kyle Berg and Connie Berg “accountable for defrauding” Pro-Mark and its employees, said bankruptcy trustee Erik A. Ahlgren.

On March 3, 2022, federal investigators remove files from Pro-Mark Services at 3275 Oak Ridge Loop E. in West Fargo. The business has since filed for bankruptcy.

FARGO — Creditors and former employees of a now-defunct West Fargo construction firm continue to seek financial relief in court from the company’s former leaders for “defrauding” them, court documents show.

The matter involves Kyle Berg and Connie Berg, of West Fargo, and several other defendants once tied to Pro-Mark Services, a company raided by the FBI in March 2022 in a potential multi-million dollar fraud case.

The most recent filings in the case, being heard in U.S. Bankruptcy Court in the District of North Dakota, focus on an “adversary proceeding” or bankruptcy court version of a federal civil lawsuit.

The civil action was initiated to hold the Bergs “accountable for defrauding” Pro-Mark and its employees, according to a response from plaintiff Erik A. Ahlgren, who serves as Chapter 7 trustee of Pro-Mark’s bankruptcy estate.

In August 2020, the Bergs sold their 100% equity interest in Pro-Mark Services to employees via an “ESOP” or employee stock ownership plan, receiving over $25 million in cash distributions, the bankruptcy court document said.

But the transaction was premised on misrepresentations of Pro-Mark’s government contracting business, Ahlgren said, and therefore the ESOP should be “undone.”

“I’m asking for the avoidance of some transfers, which is essentially a clawback to take back some assets. And here, in this case, the assets are very significant,” Ahlgren told The Forum on Thursday, July 10.

The Bergs illegally enrolled Pro-Mark in government contracting programs that gave priority to woman-owned small businesses, the documents state, but Pro-Mark didn’t qualify for those programs because Connie Berg did not control the company or “meaningfully participate” in its contracting business.

Instead, Kyle Berg controlled all aspects of the business, search warrants indicated.

That “misconduct” inflated Pro-Mark’s revenue and exposed it “to significant liabilities,” the documents state.

Had that been disclosed during the ESOP negotiations, “the transaction never would have closed — let alone at a grossly inflated sale price,” the documents state.

The misconduct was “intentionally concealed,” Ahlgren states, so the Bergs could “receive a windfall” before their “government contracting fraud” came to light.

Less than two years after the ESOP transaction closed, the federal government raided Pro-Mark, sending the business and the ESOP “into a tailspin,” documents state.

Pro-Mark filed for bankruptcy in April 2024 and its stock plummeted in value to zero.

“At the end of the day, the Bergs took millions of dollars from (Pro-Mark), and (Pro-Mark’s) creditors and employees have been left holding the bag,” Ahlgren’s response states.

A non-prosecution agreement reached between the federal government and Pro-Mark in October 2023 states the Bergs sold the company to Pro-Mark employees via an ESOP transaction for approximately $32 million, before the government became aware of the “criminal conduct.”

The Bergs, via their attorneys, are seeking to have the federal civil action moved out of bankruptcy court into U.S. District Court.

Additionally, they request a jury trial in the matter, the documents state.

Messages left by The Forum with Kyle Berg and with the couple’s attorney, Jordan Chavez, of Dallas, were not returned in time for publication of this story.

Ahlgren said he thinks it will take several more years to bring this case to a resolution.

“The fact is, we’re going to try to do the best we can to collect as much money to be able to benefit the creditors, the people who are really getting hurt in this matter,” he said.