Gypsum biomass plant builder wins federal lawsuit
June 5, 2017
DENVER — A federal court jury ruled Monday that the owners of Gypsum's biomass plant failed to pay the company that built it.
Wellons, an Oregon company, won a $10.84 million verdict, handing biomass plant owner-operator Eagle Valley Clean Energy a defeat in a civil lawsuit that has slogged on for more than a year. The jury also left the door open for Wellons to ask for interest on that amount. Wellons attorney Steve Leatham said the company will probably seek approximately $7 million in interest.
Eagle Valley Clean Energy, owned by Dean Rostrom and Kendrick Wait and based in Provo, Utah, was awarded nothing in its counter lawsuit. The company had been asking for more than $19 million.
GCube, the company that insured the biomass plant, had sued Wellons for $3.5 million to cover insurance claims paid following a conveyor belt fire that idled the plant for a year. The federal court jury awarded GCube nothing, as well.
“It was a long process, but our judge did a very good job of controlling things. We think the jury did a good job in examining all the evidence.”Steve LeathamAttorney for Wellons
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Business as usual
The Gypsum biomass plant will continue operating, Eagle Valley Clean Energy said in a statement.
"Today's verdict was a mixed decision. While we did not win the money needed to fix the defects in the plant, we are pleased that plant operations will continue unaffected," the statement said.
The biomass plant generates 11.5 megawatts of electricity per hour — enough to power 12,000 homes served by Holy Cross Energy.
Holy Cross CEO Del Worley said no matter what happens with the biomass plant, Holy Cross members will see no interruption in their electrical service.
"Holy Cross is covered with power from backup sources," Worley said.
Eagle Valley Clean Energy is an independent power producer, and how much Holy Cross pays for that electricity is "confidential," Worley said.
No fraudulent transfers
As part of its financing package to initially build the Gypsum biomass plant, Eagle Valley Clean Energy received $18.5 million in federal funding from the Obama administration's renewable-energy plan.
Leatham said Wellons believed some of that money would be used to pay what was owed on the construction bill. Instead, Leatham claims the federal money was fraudulently funneled into companies owned by Rostrom, Wait and family members.
In Monday's verdict, the jury found that the fraudulent transfer charge was not proven.
Leatham said shortly after Eagle Valley Clean Energy received $18.5 million in federal money, Eagle Valley Clean Energy started asserting that the biomass plant was suffering from construction defects.
Eagle Valley Clean Energy said if Wellons did not fix the alleged defects, then the contract between the two companies allowed the plant owner to make the fixes itself and reduce, accordingly, the final amount of money it paid Wellons for construction of the plant. Wait said Eagle Valley Clean Energy expects to spend $16 million to make repairs.
The jury ruled that Wellons did not breach the contract and that Wellons was not negligent and therefore would not be paying for the alleged repairs.
Among the three parties — Eagle Valley Clean Energy, Wellons and insurance company GCube — between 18 and 21 lawyers were in U.S. District Court Judge Brooke Jackson's courtroom each day of the nine-day trial.
When it was done, Leatham praised Jackson and the jury.
"It was a long process, but our judge did a very good job of controlling things. We think the jury did a good job in examining all the evidence," Leatham said.
Rostrom and Wait said in a statement that they had no choice but to see it through.
"We came into this community with an intent to build a sustainable energy facility to mitigate the danger of beetle kill pine trees and the fire risk inherent to property here in the mountain counties," Rostrom and Wait said. "We arrived with reputations of integrity and honesty in our business backgrounds. We contracted with an industry leader in biomass plant manufacturing. They, in our opinion, came up short of their contractual obligations. When we asked them to repair our facility — and relied on our contract to try to ensure that we got what we had agreed to pay for — they lodged an attack on our personal integrity. They alleged all manner of financial malfeasance, of "fraudulent transfer" of government funds and other personal character attacks. We are pleased that the jury could plainly see that no manner of fraud or financial misconduct occurred. We have and will put sufficient capital into our project to ensure that local jobs will be preserved and our sustainable energy plant will continue to produce energy into the future. But it is important to us, that our personal reputations are intact."
Staff Writer Randy Wyrick can be reached at 970-748-2935 and firstname.lastname@example.org.
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