Oct 312012

By Naomi Hatch
Allegations that some of the Catalyst Snowflake paper mill’s assets are being altered to make it impossible for them to be used to produce newsprint in the future have apparently caught the interest of the U.S. Justice Department. Navajo County officials note, though, that their investigation uncovered no evidence of wrongdoing on the part of Catalyst.
The allegations were first made public during the Oct. 9 meeting of the Navajo County Board of Supervisors when Snowflake Town Councilman Tom Poscharsky provided an update on the mill during the call to the pub-lic.
Poscharsky told the board Catalyst has come out of Canadian bankruptcy, but is still under the power of a U.S. bankruptcy court due to an estimated $860 million owed to creditors.
“They (Catalyst) are under an order of the court to sell off the facility to satisfy creditors,” said Poscharsky. He said he had received information alleging some of the mill’s assets are being altered to make it impossible for them to be used to produce newsprint in the future. He said he has received confirmation of this from em-ployees involved in the decommissioning of the paper mill.
“If they are doing this, it’s against federal bankruptcy laws,” said Poscharsky. He said destroying the equipment detracts from its value and will mean less money for the creditors, who only stand to collect a little over $200 million of the outstanding debt.
Last week Poscharsky was contacted by the Federal Bureau of Investigation. “I am happy to report that I had an extensive interview with a special agent of the FBI…who is conducting an investigation into Catalyst’s actions at the Snowflake Mill,” he said.
The agent told Poscharsky that his preliminary inquiry of the Justice Department indicated that additional background and information gathering was warranted.
When asked what county officials are doing regarding the Catalyst closure and the allegations that subsequently arose, County Governmental Affairs Director Hunter Moore provided the following statement:
“Since the announcement that Catalyst intended to close its doors, officials from Navajo County, including Chairman J.R. DeSpain, Supervisor David Tenney, County Attorney Brad Carlyon and Sheriff K.C. Clark, and a team of other local leaders have been working on several fronts to facilitate the purchase of the mill by a qualified buyer, and to gather credible information regarding the bankruptcy proceedings and all the federal and state laws which pertain to environmental concerns with a closure.
“It is our understanding that the Federal Bureau of Investigations and the United States Department of Justice are looking into issues involving the dismantling of the mill. Navajo County will fully participate in any such investigation and provide any information we may have. We are also aware that some interviews have been conducted by the FBI, but we do not feel it is appropriate to comment on their investigation. The agent working the case Henry Brice.
“The offices of the sheriff and county attorney have conducted their own investigation regarding reports that Catalyst was illegally dismantling the machinery at the mill, but their investigation did not uncover any illegal activity. On Oct. 11, investigators from the Navajo County Sheriff’s Office went to the Snowflake Power Plant, which is next to Catalyst, and spoke with employees that had all witnessed several trucks leaving Catalyst with pieces of steel from the property. Upon further investigation, officials learned that the trucks were being filled with parts of the paper machines and sold as scrap metal.
“At that time, investigators from the sheriff’s office spoke to the person in charge of the Catalyst operations, and conducted several interviews with people on site. Officials from the mill advised investigators that Catalyst had emerged from bankruptcy, and that as the owner of their own assets and property they could take actions that they deemed necessary to prepare the property to sell at auction.
“Representatives from Catalyst also advised investigators that they had received a letter from Navajo County Chairman J.R. DeSpain on Monday, Oct. 8, 2012, voicing the county’s concerns about the closure and the environmental laws that had to be followed. Investigators were then told that the mill was shut down after receiving the letter so the Arizona Department of Environmental Quality (ADEQ) could be consulted before further action was taken.
“Investigators were then able to confirm that ADEQ had been contacted, and that Catalyst had been advised by ADEQ inspectors that they could continue with the dismantling of the machinery.”
When asked if the county is working to keep the Apache Railway from being scrapped, Moore responded:
“The railroad is one of several assets that was put up for auction by Catalyst on Sept. 17, 2012. Those interested in the bidding process have had to meet with certain deadlines and confidentiality agreements, but all bids for the assets are required to be submitted by Nov. 1, 2012, at 5 p.m. (Vancouver time). While the loss of the mill, and the jobs it represents, is the most immediate concern, the railroad carries significant value and potential for the economic future of the region. Thus, Navajo County has conducted an analysis to ascertain if there are any legal avenues that could prevent the dismantling of the railroad spur.
“While we continue to evaluate the facts and legal precedents regarding the situation, the most likely path to prevent the railroad from being scrapped is also the most impractical. There does not appear to be a substantial legal basis for Navajo County to initiate a condemnation action. Even if there was a substantial legal basis, Navajo County does not have the financial resources to pay Catalyst the value of the railroad,” Moore concluded.
Even so, the county supervisors will hold a special meeting at 8:30 this morning (Oct. 31) in Holbrook to determine if they do want to consider such action.