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Former mayor says pulp plant looked like sure thing

May 30, 1998|By JULIE E. GREENE

The paper recycling plant once heralded as "the project of a generation" by former Hagerstown Mayor Steven T. Sager has turned into an "unfortunate" situation, Sager said Friday.

Hagerstown Fiber Limited Partnership, which owns the plant, has declared Chapter 11 bankruptcy and filed a $130 million lawsuit against 26 defendants.

The city is owed $2.35 million from the partnership for construction of an electrical substation for the plant and water and sewer costs, according to the Chapter 11 filing in U.S. Bankruptcy Court in New York City.

Sager said he was skeptical of the separate lawsuit. "You can write anything into a lawsuit," he said.

Sager said city officials did plenty of research before approving the project, including touring another plant and talking to design engineers.

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The only other thing the city could have done was have a "crystal ball about the world price of pulp," Sager said.

Company officials cited a depressed market for recycled paper last August when they shut down the plant at Memorial and Eastern boulevards and laid off all of its employees.

Until the price of pulp rebounds, Sager said, the disputing parties have incentive to fight rather than settle and cooperate.

"It's my own opinion that, but for the depressed pulp prices, there wouldn't be any lawsuits," Sager said.

Sager said he believes the plant will reopen once the market price for pulp rises.

City Councilman William M. Breichner said he also believes someone will eventually buy the plant at a reduced price.

"It certainly would be nice to get this all behind us," Breichner said.

Sager said both the reputations of the two men on both sides of the dispute - original developer Andrew H. Kaufman and Carl C. Landegger - are excellent.

Kaufman is president of Pencor Inc., the general partner of Hagerstown Fiber Limited Partnership.

Landegger is chairman of several of the companies involved in the plant's construction and operation, including Black Clawson Co., which supplied equipment to strip the ink from waste paper.

So excellent was Landegger's reputation that former City Councilman John L. Schnebly said Landegger's involvement was the "linchpin" to the city's approving the project.

Landegger's involvement comforted city officials about an ambitious project, Schnebly said.

Landegger is a primary defendant in the suit brought by Hagerstown Fiber Limited Partnership.

Landegger was out of town and couldn't be reached for comment, according to his assistant, Robert Harris, in New York City. Harris is a co-defendant in the suit, which he called "unfounded."

"We do not intend to carry on this lawsuit in the newspaper. It will be carried on in a court of law," Harris said Friday.

Sager said he expects there to be a series of lawsuits and counter suits from the dispute.

Schnebly agreed.

"That seems to be the nature (that) when the economics of some of these deals go sour you can get into some real dogfights because everyone's looking for cover," he said.

Whether the city becomes embroiled further in the legal disputes remains to be seen.

City Administrator Bruce Zimmerman said it would be premature for the city to sue the partnership. A bankruptcy proceeding can be complex and this one is in the early stages, he said.

Among the 26 defendants named in the lawsuit is R.W. Beck, an independent consulting engineering firm that does a lot of work for utilities, including Hagerstown's City Light.

The lawsuit alleges Beck lost its independence and helped Landegger and SBCCS conceal their failure to meet contractual requirements for the plant.

"The allegations against us are entirely without merit," said John Forman, spokesman for Seattle-based R.W. Beck.

"As near as we can tell they're dragging everyone they can think of into it," Forman said.

"We're confident in our independent reviews. It's something that Beck has done for many, many years and will continue to do," Forman said.

Zimmerman said he has not seen the specific allegations in the lawsuit. He said he was concerned because the city has hired Beck, but added that Beck always did a good job for Hagerstown.

Beck was hired to analyze a proposed purchase of City Light by Allegheny Power and is now studying wholesale power bids for the city department, Zimmerman said.

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