BATON ROUGE, La. (AP) — The state will pay $1.3 million to settle litigation stemming from the financing of a failed cypress mill in Tangipahoa Parish.
Commissioner of Agriculture Mike Strain told The Advocate (http://bit.ly/SigO0H ) that the decision to settle came after the state lost legal battles that went as far as the state Supreme Court.
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At issue was former commissioner Bob Odom’s granting of state financial backing to a $3.2 million loan that Louisiana State Cypress secured from Texans Federal Credit Union. The state’s guarantee was arranged through the Louisiana Market Commission, a state panel chaired by the agriculture commissioner.
The cypress mill failed and Louisiana Cypress stopped repaying the loan. So, the credit union went to court seeking money from the state.
Strain had raised the argument that the state guarantee was invalid because Odom neglected to get the state Bond Commission’s permission for it.
The courts sided with Texans, which is in conservatorship.
“As painful as it is … I think they’re entitled to enforce the guaranty,” state District Court Judge Tim Kelley with the 19th Judicial District told the state.
The courts found that legislators eliminated the requirement that the Louisiana Market Commission seek the state Bond Commission’s approval on loans and loan guarantees in 1978. The only limitation left in the law was that the market commission could not exceed $20 million in outstanding loans and loan guarantees at any one time.
Strain said he made more than one settlement offer to Texans.
“I offered them the mill. They said, ‘No, thanks.’ They wanted the cash,” he said.
The mill sits idle in Roseland on a lonely stretch of country road. The 35 acres of land appraised for $182,000 in 2009. The buildings and equipment are worth more than $1 million.
With penalties and interest, the judgment against the state was $5.4 million when Strain made a second offer.
“Every day we didn’t settle it, it was growing by $1,500 a day. So I made an offer,” he said.
Texans accepted $1.3 million. Strain gave the bank $800,000 in marketing commission funds and $480,000 from his department’s budget.
John Fairbanks, public affairs specialist for the National Credit Union Administration, said: “The settlement agreement was in the best interests of the state of Louisiana, Texans Federal Credit Union and the credit union’s members.”
Strain said, the state agriculture department no longer is in the business of guaranteeing loans for private businesses. He dissolved the market commission and is disposing of the cypress mill and a failed, state-backed syrup mill in Lacassine.
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Information from: The Advocate, http://theadvocate.com
