IRS files $2.49 million in liens against Cate Street companies for not paying corporate income taxes

The East Millinocket mill.
Bridget Brown | BDN
The East Millinocket mill. Buy Photo
Posted April 11, 2014, at 5:31 p.m.
Last modified April 12, 2014, at 5:47 a.m.

EAST MILLINOCKET, Maine — The Internal Revenue Service became the latest entity claiming it is owed money from two Katahdin region companies owned by Cate Street Capital when it filed two liens totaling $2.49 million for nonpayment of corporate income taxes on Thursday.

The IRS became the largest single creditor of the New Hampshire-based firm’s subsidiaries under the Great Northern Paper Co. LLC umbrella when it filed the liens at the Penobscot County Registry of Deeds in Bangor. One lien, for $1.43 million, was filed against GNP West Inc., one of the companies formed to operate an industrial park in Millinocket. The other, for $1.05 million, was filed against GNP East Inc., which is listed as a co-licensee on state environmental permits given to the paper mill in East Millinocket.

The liens concern nonpayment of corporate income taxes for the 2012 fiscal year, said Peggy Riley, an IRS spokeswoman.

Records show Cate Street’s GNP companies are at least $6.81 million in debt to the federal government, East Millinocket and Millinocket, and several vendors who have sued or filed liens since February 2013.

Before the IRS filings, vendors supplying the companies had gone to civil court or filed liens for unpaid bills totaling $1.32 million and been paid $117,587, Penobscot County records show.

After the IRS, the largest single creditor is the town of Millinocket, which is owed $2.3 million in property taxes, not counting interest. GNP owes East Millinocket $657,900 in property taxes, again without interest. Neither town has filed a lien.

East Millinocket and Millinocket officials have said they plan to take action against Cate Street or its subsidiaries for their delinquent property taxes next month. The parent company or its subsidiaries own the paper mill on Main Street in East Millinocket and several properties in Millinocket, including an industrial park on Katahdin Avenue.

Cate Street’s subsidiary Great Northern Paper Co. ceased mill production in late January and laid off 212 of the mill’s 256 workers about two weeks later, citing high energy and production costs and the need for greater efficiencies.

Security Fence Co. of Pittsfield is owed the smallest amount, $11,650. It sought its lean against GNP Maine Holdings LLC on March 7, according to records.

Security Fence owner Lorraine Bouffard said she disliked having to file the lien, but after installing 390 feet of fencing and gates around a portion of the East Millinocket paper mill in November and December 2013, the company stopped returning her telephone calls. Bouffard, whose company employs three people, became frustrated, she said.

“The end of December came and I thought for sure I would get my payment. I didn’t get it and I started calling in January to see when payment might be coming,” Bouffard said Friday. “At first they said everyone had been on vacation during holidays and that was probably causing the delay. Then they said they were having cash flow problems.”

“I am kind of nervous right now. I don’t really know. I fully thought they were good to do business with,” Bouffard added. “From their reputation in the past as Great Northern, I fully felt that we would get paid. My debt I am sure is a small one, but to a small company, if you don’t get paid, it hurts. It hurts a lot.”

Prentiss & Carlisle Management Co. of Bangor sued in Bangor District Court and was awarded an attachment on GNP property totaling $426,678. AV Terrace Bay Inc. of Ontario is owed $407,127 and filed its lien on March 19, records show.

Cate Street spokeswoman Elizabeth Baldacci of Baldacci Communications, a company formed in 2012 by former Gov. John Baldacci’s brother Robert, did not immediately return telephone and email messages left Friday. Baldacci replaced Scott Tranchemontagne of Montagne Communications, who continues to represent Cate Street on other projects. Company officials announced his replacement as Cate Street’s Maine spokesman on Thursday.

Officials from Thermogen Industries, the Cate Street subsidiary looking to launch a pellet mill at the industrial park, promised during a meeting with the Millinocket Town Council on Thursday that the outstanding property taxes would be paid within two months. That’s when a Finance Authority of Maine $25 million loan guarantee is expected to be released. FAME requires the company to pay its outstanding property taxes before issuing the bond.

Lane Construction Corp. of Orono filed the first lien against GNP Maine Holdings LLC for $101,775 alleging nonpayment for road improvement work done around a natural gas facility at the East Millinocket mill on Feb. 7, 2013. The 12 liens, mechanic’s liens or attachments filed against Cate Street subsidiaries seek payment or property in lieu of payment.

The private companies filing attachments or liens with the Penobscot County Registry of Deeds as of Friday also include Day and Ross Inc., Electrical Solutions of Auburn, Gilman Electrical Supply, and Millinocket Fabrication and Machine Inc.

Millinocket Fabrication and Machine collected $117,587 it was owed in increments of $6,816, $12,807, $24,343, $33,718 and $39,903, records show.

In a separate action outside Maine and not included in the $6.8 million total, a General Electric subsidiary is suing Cate Street for $996,777 in connection with a failed water-recycling business in Wyoming.

Gov. Paul LePage signed a new law on Monday that permits hydroelectric dam owner Brookfield Asset Management to negotiate a shared profit with Cate Street Capital to sell electricity to the marketplace “as long as there is no reduction in labor force associated with the cessation or reduction of paper production.”

Brookfield and Cate Street are negotiating a deal, company spokesmen have said. Cate Street said it needs the revenue from electricity sales in order to restart the East Millinocket mill.

The previous law had limited how often Brookfield could sell electricity. The new law effectively allows both parties to sell wholesale electricity more often while keeping the mill operational, legislators said.

 

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