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Photo by Bill Wagner Clyde Carpenter of Castle Rock, a member of the Fort Vancouver Pipe Band, entertains guests at the JH Kelly St. Patrick's Day party Friday night at the fairgrounds. |
Where did the BPA money go?
Sunday, March 16, 2003 9:33 AM PST
By Pat Forgey
Printable version
E-mail this articleJust two years after the Bonneville Power Administration paid Longview Aluminum $226 million to shut down and stop using power, the company said its coffers were down to only $630,000, and it has filed bankruptcy.
Where did the money go?
Lynch issued a statement March 7 saying that after paying expenses over the last two years, Longview Aluminum has $2.3 million in cash left. A Longview Aluminum bankruptcy filing Lynch signed said the company has $630,000 in cash and a letter of credit worth $2.5 million.
BPA spokesman Mike Hansen started a tiff with the company earlier this month by speculating that Longview Aluminum chairman Michael Lynch had put $75 million "in his own pocket." Lynch angrily demanded a retraction, and BPA issued a "clarification" that left the location of the money in doubt.
Local United Steelworkers official Gaylan Prescott said he didn't know where the money went either. "I wish I did, but I don't," he said.
To answer the question, the Daily News interviewed Lynch and other company representatives, talked with others involved with the company and reviewed court and other public documents regarding the company's finances.
The interviews provided some answers about where the money went, but also left some parts in dispute.
Lynch denies personally benefiting from the ownership of the smelter and that he and Longview Aluminum LLC partners John Kolleng and Matt Ochalski have not taken payments other than salary out of the company.
"Our goal is not to take out distributions until after we've made profitability," he said.
Lynch and the partners bought the smelter from Alcoa Inc. in early 2001 and immediately signed a $226 million deal with BPA to shut down the plant. That allowed BPA to use the approximately 280 megawatts of power that the smelter would have used and avoid purchasing additional power on the open market at then-inflated prices during a West Coast energy crisis.
Lynch said he used that money to pay off the $155 million purchase price of the plant from Alcoa, along with financing charges, which brought the price up to $167.9 million.
Longview Aluminum did not buy the land on which the plant sits on the bank of the Columbia River, but instead leased it for 99 years. Lynch said he prepaid that lease at a cost of $6.9 million.
Then, as part of the power buyback agreement, Longview Aluminum agreed to pay wages for its idled workers until its scheduled restart date of March 2002. That amounted to $35.5 million, Lynch said, and added that BPA had audited its books to see the money was spent properly.
BPA officials characterized their look at how the money was spent as a "review" rather than an audit, but said Longview Aluminum met its obligations.
"The review confirmed that Longview Aluminum's uses of the funds were in accord with its agreement with BPA," said Ed Mosey, the agency's chief press officer.
Other Longview Aluminum expenses since then have included $3.2 million to purchase power and transmission rights from BPA, Lynch said. Additional expenses came from the costs of simply maintaining a closed plant, including running offices, pollution protection equipment, and providing security and safety lighting that consumed about 2 megawatts per month.
Longview Aluminum spokesperson Holly Bartecki estimated that it cost $1 million a month to maintain the closed plant, including salaries and professional services.
Salaries went to plant manager Lou Locke and other employees. It's not clear how many employees remain at the smelter in addition to Locke, but some of the salary expense likely went to employees at Longview Aluminum's corporate headquarters in Chicago. Security and environmental workers at the smelter are contract workers, Bartecki said.
Longview Aluminum and BPA are in a bitter dispute over a bill for $21 million that Longview Aluminum hasn't paid. When the company shut down in 2001 to sell power back to the BPA, it also signed a contract obligating it to take or pay for additional power through 2006.
Because of nonpayment, BPA had threatened to shut off power to the plant site at the end of February. That dispute precipitated the bankruptcy filing when Longview Aluminum made a last-ditch effort to keep its power from being disconnected and the plant's viability intact, according to a statement issued by Lynch.
The bankruptcy was filed March 4 in Delaware. In subsequent bankruptcy court filings, Longview Aluminum said 17 employees were drawing salaries, including its three managers. For the March 4 to March 18 pay period, Longview Aluminum expects to pay them $31,784 plus benefits.
Lynch declined to tell the Daily News how much his salary or his partners' salaries were, but called them a "pittance for a $400 million" company.
To minimize hardship to the remaining employees and "to maintain morale during this critical time" Lynch has asked the bankruptcy court to approve continued payment of salaries during the bankruptcy.
Longview Aluminum also has one other non-cash asset. The company estimated in a bankruptcy filing that the machinery and equipment at the plant and stocks of aluminum on hand are worth $8-$8.5 million if it were liquidated.
The Longview bankruptcy filing is a reorganization, not a liquidation, and in a statement issued through Bartecki, "Lynch emphasized that company officials remain committed to preserving their investment in Longview Aluminum, protecting its approximately 1,000 manufacturing jobs and contributing to the economic renewal of the region."
Lynch and his partners own other aluminum plants in addition to Longview Aluminum that are also in bankruptcy, including McCook Metals of Illinois and Scottsboro Aluminum of Alabama.
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