Attorney- Defunct chip mill has no money to repay state grant

The former parent company of a failed Scott City wood chip mill has until March either to repay $393,000 to the Department of Economic Development or file an appeal.

"Canal Wood does not have any money to pay," said attorney J. Kent Lowry, of the Armstrong-Teasdale law firm of Jefferson City, representing Canal Wood.

At the request of Missouri Attorney General Jay Nixon, Scott County Circuit Court Judge David Dolan recently ordered Canal Wood Corp. of Chester, S.C., to repay the money for reneging on its agreement to provide 20 jobs in the Scott City area for an agreed-upon five-year period.

Lowry said Thursday that he does not yet know what Canal Wood plans to do. An appeal, he said, is one of the options open to the company. He declined to elaborate on the others, saying he has not yet spoken with Canal Wood officials about the judgment.

Canal Wood has 10 days from the date Dolan's order becomes final to file an appeal, Lowry said. Dolan's order becomes final 30 days from Jan. 31, the date his judgment was entered.

Canal Wood Corp., a privately-held, family owned corporation, opened the chip mill in 1997. It invested some of its own capital and agreed to create and maintain 20 jobs for the next five years as part of a contractual agreement with the Department of Economic Development, the Southeast Missouri Regional Port Authority, Scott City and Scott County. The DED provided money to be used for infrastructure, paving a road the port authority owns leading to the chip mill. The DED grant also paid for a new water well for Scott City. Canal Wood received the benefit of those improvements, which are still in place and in use.

Canal Wood agreed that if it breached its contract with the state it would pay the contract price of $193,588 plus $10,000 for every employee not hired and employed for five years -- which the court determined to be $393,000.

Four years into the contract, in February 2001, Canal Wood ceased operations. In May 2002, Nixon sued asking that the state be reimbursed. Last March Nixon filed a motion for a summary judgment, asking that the court issue a ruling based on the evidence presented to that point. Dolan held a hearing on the motion last September, and granted the motion Jan. 31.

In October 2001 Canal Wood merged with CWC Holdings and continues to operate. It sold some of its subsidiaries when the president of its board of directors died. Later Missouri Fibre Corp. bought the Scott City chip mill and reopened its production.

Officials at Canal Wood in Chester, S.C., said Thursday that neither the state nor Lowry had advised them of the judgment, and declined comment.

lredeffer@semissourian.com

335-6611, extension 160