(FORTUNE Magazine) – Why buy a mere yacht when you can buy an entire yacht company? That was the question Monster CEO Andrew McKelvey asked himself in 2000--and answered by buying a storied boat builder called Palmer Johnson. Today the company is in the midst of a controversial Chapter 11 filing, and McKelvey is out some $25 million.

Palmer Johnson, an 85-year-old company based in Sturgeon Bay, Wis., was previously owned by Texas Instruments founder Patrick Haggerty, whose son-in-law turned it into a player on the world custom-yacht scene. (It built, among other boats, Ted Turner's famed sailboat Tenacious.) In the late 1990s Palmer Johnson built a 115-footer, called My Mostro, for McKelvey; he thought the company lacked marketing skills and decided that "I could do better," as he puts it today.

At the time, Palmer Johnson was poised to lose millions on boats it was under contract to build. McKelvey told people he didn't care. He pumped $10 million into the company, arranged for a $15 million line of credit (secured with a $5 million personal guarantee and 180,000 shares of TMP), hired a CEO to run his new toy, and went back to New York. "You shouldn't run a boat company as an absentee owner," he says now.

That wasn't the only problem. The economy tanked, and people stopped building boats. Then one customer complained his new yacht wasn't up to snuff, refused to pay, and sued. McKelvey had put another $7 million into Palmer Johnson, but that couldn't stave off the cash crunch. In early 2003 the company laid off 60 employees.

Enter a wealthy former cricket star named Timur Mohamed, who was also having Palmer Johnson build him a boat. In January, Mohamed lent Palmer Johnson $1 million. He then bought the company's Savannah yard, plus a second Savannah yard, previously owned by WorldCom's Bernie Ebbers, where he planned to begin building smaller sporting yachts. Most important, he intended to build the boats under the Palmer Johnson name, because in return for the forgiveness of the $1 million loan, McKelvey sold him that too. (Palmer Johnson could also still use its name.)

Just weeks later, Palmer Johnson was forced into bankruptcy by its creditors, who began asking angry questions, such as: Wasn't the Palmer Johnson name worth more than $1 million? Ralph Anzivino, the bankruptcy examiner, later concluded that the sale was "voidable" because it favored Mohamed at the expense of other creditors.

Today Palmer Johnson is suing Mohamed to get its name back. Mohamed is suing McKelvey, citing McKelvey's original representations that he had the right to sell the name. McKelvey is suing Mohamed. And both McKelvey and Mohamed have filed separate plans to bring the company out of bankruptcy and take control of it. (McKelvey's plan calls for him to bring cash into the company by financing a new, $14 million, 140-foot boat.) "It's better than a soap opera," says Boating News publisher Brian Boltz.

At the last minute, yet another multimillionaire, CSFB investment banker Steve Rattner (a different Steve Rattner from the one in the Quadrangle Group) entered the fray. Rattner plans to inject cash into Palmer Johnson by building two mega-yachts, including one for himself. His plan, though, is contingent on Palmer Johnson retrieving its name from Mohamed.

McKelvey isn't pushing for his plan. And since neither Rattner nor Mohamed plan to return any of the millions McKelvey pumped into Palmer Johnson, it looks as though he will be out $25 million no matter who gets control. "You make a lot of money with what you know, and you lose a lot with what you don't know," says McKelvey today. "If I had it to do all over again, I would have given the money to charity."