State starts criminal investigation of co-gen

The Montana Attorney General has started a criminal investigation into whether the owners of the co-gen plant near Thompson Falls provided fraudulent information to the Montana Department of Environmental Quality in order to obtain a nearly $1.6 million reduction in fines for repeatedly violating air quality standards.

Montana Governor Brian Schweitzer requested Attorney General Mike McGrath start the investigation after receiving a letter from the Clark Fork Coalition, which was signed by 14 Sanders County residents.

The letter asked that Schweitzer launch an investigation into whether Thompson River Co-gen and its owner, Barry Bates, broke the law and lied to the DEQ in last fall's settlement and it also asked that Schweitzer review the policies that led the DEQ to reach the settlement with the TRC.

“It's way overdue. It should never have gotten to this point,” Thompson Falls resident Morlene Plouzek said about the investigation. Plouzek, the president and founder of the Community Awareness Network and one of the Sanders County residents who signed the letter, said she still isn't convinced the criminal investigation will amount to anything. “If it goes the way it's always gone, there won't be a whole lot happen,” she said.

According to the CFC letter, in February 2006, DEQ cited TRC with hundreds of violations of the Montana Air Quality Act and proposed a fine of over $1.8 million. On Nov. 16, 2007, DEQ settled the fine against TRC for $200,000, which is roughly 10 cents on the dollar, based on the TRC's insistence that it could not afford to pay a higher fine. Approximately two weeks later, TRC sold its plant to multi-billion dollar company Wayzata Investment Partners for an undisclosed amount.

Prior to the settlement, DEQ had hired a consulting firm from Massachusetts to conduct a financial analysis of TRC's ability to pay. The company specifically asked TRC whether any sale of the plant was on the horizon and was told no.

“This statement appears to be false. It is inconceivable that the sale was not on the horizon at the time of the settlement and when the financial report was prepared,” the letter stated. According to the document, the entity that Wayzata Partners formed to hold the plant, Thompson River Power, LLC, came into existence Nov. 9, 2007, exactly one week before the settlement was signed.

The letter stated the CFC would like to examine the records to see what false statements TRC made, but this was impossible because DEQ agreed to TRC's request for permission to submit the relevant supporting information only to the company hired to prepare the financial analysis and not to DEQ. “TRC said it couldn't afford to pay the fine. This appears to have been less than the whole truth. But the state can't prove that TRC lied because it bent over backwards to help TRC keep it representations secret,” the letter states.

CFC also questioned why DEQ would be willing to grant this request to a company and owner who have a history of dishonest and criminal behavior. According to the letter, DEQ found TRC to have deliberately violated its air quality permit on several occasions in 2002 and fined it $106,000 in September 2004. Also in 2004, TRC was forced to re-pay a $10.5 million subsidized loan, when the Montana Board of Investments learned that the company's earlier statements that it had obtained all the necessary permits to build its coal plant were false.

The letter stated that Bates was ordered to pay $20,000 in connection with charges of federal securities fraud by a federal district court in Colorado in 1999 and in April 2007, he was sentenced in federal court to three months house arrest, five years of probation and a $300,000 fine after being convicted of various federal income tax violations.

“Given this track record, we do not understand why DEQ would not only trust TRC's statements, but actually prevent itself from verifying the truth of those statements. If this is how the system operates in Montana, then the system is badly broken,” the letter stated.

CFC wanted to know why DEQ would compromise with a company with such a checkered pass. “We understand that Montana has environmental laws governing enforcement, but we cannot believe those laws require DEQ to assist convicted criminals in fleecing the people of this state,” the letter stated.

Plouzek is also unhappy with DEQ's involvement with the plant. “The DEQ just did cartwheels for them,” she said. She said the situation could have been prevented if DEQ would have done what the public wanted and what they were supposed to do. “They (DEQ) have no right to even use environmental quality in their title, because they do not promote environmental quality and they do not control environmental quality,” she said. “It really needs somebody separate than the DEQ to come in and evaluate this,” Plouzek added.

“I have a lot of decisions to make in a course of a week. I have to make these decisions on the best information we had and the best information was not these guys' (TRC) word,” said Richard Opper, the director for DEQ. He said he wasn't prepared to take the TRC's word at face value and that is why the DEQ decided to bring in the independent firm from Massachusetts.

Opper said the firm told DEQ that not only did TRC not have the money to pay the fine, the prospects of them getting the money were very slim. He said DEQ was told that the TRC wouldn't be able to turn a profit for 20 years.

“The company verified that all they (TRC) could possibly pay was the $176,000 they had in an escrow account, so we have two choices here,” Opper said. He said that DEQ could try to negotiate with the TRC or take them to court and try to get the full $1.8 million. “We were told that they have no money and so taking them to court would be a waste of time,” Opper said.

He said right after they settled with TRC, TRC defaulted on a $10 million loan from Wayzata Partners and so Wayzata Partners took over the plant. “We did not know the company (TRC) was going to default right after they signed the agreement,” Opper said.

Opper said he doesn't know what DEQ can do to recover the rest of the fines if the criminal investigation finds that TRC was guilty of fraud. “I don't know what our options are, but I tell you what, if we can go after them, we will. If we were lied to … we will definitely go after them.”