A company created by the investor in two Katahdin region paper mills to operate a 75-megawatt biomass boiler in Gorham, New Hampshire, is suing another energy producer in that state for the return of $140,000 in miswired funds, officials said Friday.
Newco Energy LLC, which lists Cate Street Capital as a parent corporation, and Berlin Station LLC have a pending lawsuit claiming unjust enrichment and breach of contract against Laidlaw Energy Group LLC of New York in U.S. District Court in New Hampshire, a court official said Friday.
Filed in March, the lawsuit alleges that Laidlaw, the original developer of the Gorham project, and its CEO, Michael B. Bartoszek, failed to return $140,000 in funds that Berlin Station “mistakenly wire-transferred” to “an old Laidlaw account previously on file” with Berlin Station in December 2013, court documents state.
Alexandra Ritchie, a managing director and spokeswoman for Cate Street, told Bartoszek via email and telephone message on Dec. 24, 2013, and Jan. 2, 2014, of the mistaken transfer and sought the money’s return, court documents state.
The transfer occurred more than two years after Berlin Station paid Laidlaw about $3.56 million as part of a settlement of a dispute over the Gorham project’s purchase and sale agreement, but Laidlaw officials cited the dispute when they refused to return the money, court documents state.
According to the lawsuit filed by Newco and Berlin Station attorney Brian L. Champion of Kennebunk, “Laidlaw claimed that it is entitled to keep the funds as an offset against monies that were owed under the Purchase and Sales Agreement,” despite the settlement of that agreement on Oct. 17, 2011.
Champion and Ritchie did not return messages and attempts to contact Bartoszek and Laidlaw officials by email were unsuccessful on Friday.
Cate Street bought paper mills in East Millinocket and Millinocket for $1 in October 2011 and created Great Northern Paper Co. LLC to operate them. Great Northern never restarted the Millinocket paper mill, but ran the East Millinocket mill until shutting it down in January 2014 and laying off 212 of 256 workers there on Feb. 6.
Great Northern, Ritchie has said, is working to restart the East Millinocket paper mill and resolve property tax debts totaling approximately $3 million in gross taxes that it owes East Millinocket and Millinocket.
The company has paid Millinocket $225,000 of a gross debt of $2.17 million, plus interest and fees, but has not yet paid $340,000 that it owed Millinocket as of Tuesday. It has made no payment arrangement as yet with East Millinocket, which it owes about $657,900 in property taxes for the 2013-14 fiscal year, which ended June 30.
The federal court last month granted Champion until July 31 to serve Bartoszek and Laidlaw with lawsuit paperwork after Champion filed a motion seeking more time to locate them, a court official said.
The U.S. Securities and Exchange Commission charged Laidlaw and Bartoszek with insider trading and an illegal stock offering of penny stocks in June 2013. The SEC alleged that both proactively sold and illicitly profited from the sale of 2 billion shares of Laidlaw’s common stock in 35 issuances to three commonly controlled purchasers at deep discounts from the market price without telling investors of the company’s financial struggles.
Laidlaw, the SEC alleged, did not register this stock offering with the SEC, and no exemptions from registration were applicable. SEC investigators claimed that Bartoszek “knew that the purchasers were dumping the shares into the market usually within days or weeks of the purchases to make hundreds of thousands of dollars in profits.”
“Laidlaw’s $1.2 million in proceeds from these transactions was essentially the sole source of funds for the company’s operations during most of its existence,” the SEC said in a press statement.
The SEC charges are pending in the U.S. District Court for the Southern District of New York, SEC officials said.