General Electric subsidiary suing Cate Street for alleged nonpayment in failed Wyoming venture

Posted March 25, 2014, at 3:18 p.m.
Last modified March 25, 2014, at 8:58 p.m.

EAST MILLINOCKET, Maine — A division of General Electric is suing the owner of Great Northern Paper Co. for alleged nonpayment of $996,777 in connection with a failed water-recycling business in Wyoming, according to court documents.

G.E. Mobile Water Inc. of Norfolk, Va., joins East Millinocket and Millinocket officials in claiming that Cate Street Capital of Portsmouth, N.H. hasn’t paid its bills.

In their Aug. 8 lawsuit filed in federal court in New Hampshire, G.E. officials said Cate Street broke a $3.26 million contract signed in February 2012 to rent water treatment equipment to the N.H. company’s subsidiaries Clean Runner LLC and Red Shield Reclamation LLC. Cate Street had launched a venture that would clean water left over from a natural-gas drilling method known as fracking.

G.E. Mobile Water claims that Cate Street officials made one payment of $20,000, negotiated a $172,050 credit, and accrued $996,777 in debt until the project was shut down in October 2012, less than a third of the way into the contract. The lawsuit seeks payment of the debt.

G.E. Mobile Water officials tried to contact Cate Street President John Halle several times to discuss payment arrangements, “yet Halle never returned these calls,” the lawsuit states. “Upon information and belief, as of November 2012, the site has been shut down and all Red Desert employees have been laid off, except for a security detail,” the documents state.

Cate Street spokesman Scott Tranchemontagne released a statement late Tuesday afternoon saying the lawsuit is “without merit.”

“Cate Street Capital has numerous business interests across multiple industries and sometimes disputes among parties lead to legal action,” Tranchemontagne said Tuesday. “We believe this suit is without merit and we will provide evidence in court that supports our position. Unfortunately we are unable to comment further in the media while the case is pending.”

New Hampshire U.S. District Court Judge Paul Bardadoro on March 7 dismissed G.E. Mobile Water’s breach of contract claim against Clean Runner and its unjust enrichment, fraud and negligent representation claims against Cate Street and its subsidiaries, according to documents filed with the case.

Bardadoro rejected Cate Street’s motion to dismiss the rest of the lawsuit. Attorneys for both sides are expected to file several more pretrial motions before a jury trial date will be set, a clerk at the New Hampshire court said Monday.

An official at G.E. Mobile Water, Inc. and the attorneys representing both sides declined to comment on the lawsuit on Monday and Tuesday.

Cate Street officials have announced plans to build wood pellet mills in Millinocket and Eastport while struggling to operate the paper mill and pay their taxes. The company owes East Millinocket and Millinocket about $3 million in property taxes for the 2013-14 fiscal year. The second-half tax year payments to both towns were due in February. The nonpayment was among the reasons East Millinocket laid off four town workers.

The company was also several months behind before paying its taxes to the towns the year before.

Tranchemontagne also confirmed in May 2013 that the company was months behind in its payments to its Maine vendors. That prompted state Sen. Doug Thomas, R-Ripley, to meet with Gov. Paul LePage to discuss the nonpayment, which was partly caused by legislators’ needing four months to fix an omission in the state’s New Market Tax Credit program regulations.

LePage met with Cate Street officials on Friday. They have declined to comment on the meeting.

The Legislature is considering a bill proposed by LePage that would permit Cate Street to negotiate a revenue-sharing agreement with Brookfield Asset Management over the electricity Brookfield’s three Penobscot River hydropower dams generate during mill shutdowns.

The revenue, Cate Street officials have said, is crucial to hopes of restarting the mill, which was idled on Jan. 23, and rehiring 212 of 256 workers laid off on Feb. 6. The restart is due to occur by May 1.

The Finance Authority of Maine approved a $25 million loan guarantee to Cate Street in October to aid the company in building its $140 million pellet mill in Millinocket, but FAME officials have not distributed the funds.

Cate Street announced on March 6 that it would replace its pellet manufacturing process, a commercially untested microwave technology, with the Masonite process used to produce wallboard and the Kraft pulping techniques that make pulp for paper manufacture. That compelled FAME to announce a further review of the project next month, although it did not void the October vote, officials said.

The company must pay its outstanding property taxes before it can receive the loan guarantee, FAME officials have said.

 

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