Watchdog

Promise of 1,400 jobs produces unpaid bills, lawsuits in Manchester

Manchester Mayor George Saylor hasn't heard anything from WNT since he took over as mayor in 2011.
Manchester Mayor George Saylor hasn't heard anything from WNT since he took over as mayor in 2011.

MANCHESTER — When a Florida company said in 2009 it planned to build a factory in Clay County and hire 1,400 people, it seemed almost too good to be true.

The poverty rate in the Eastern Kentucky county was three times the national level, and the estimated median income of residents was $20,999, less than half the national figure of $50,740. Even with an unemployment rate of 13.5 percent, the county couldn't possibly fully staff the factory.

Nearly three years on, the project has produced nothing but unpaid bills and lawsuits.

The city bought a $900,000 site for the factory and incurred fees for engineering and other work, but the company didn't come.

Now, the city is being sued for $500,000 in unpaid bills for work companies did at the site, and is still paying for the land, which sits largely empty, eroding and, at this point, unneeded.

"The effect is that we have had to use money to pay for that, that we could have been using for other things," said Manchester Mayor George Saylor.

Saylor believes the city, desperate for jobs, got sucked into an investment scheme.

The empty promises started when a Destin, Fla., company called Waste Not Technologies approached officials in rural areas of several states, touting a plan to construct large manufacturing complexes that would use garbage to make products such as building materials, shipping pallets and insulation.

Officials from Waste Not Technologies, or WNT, a part of Global Green Holdings, talked with officials in Kentucky, Kansas, Oklahoma, Michigan, South Carolina and perhaps elsewhere.

A spokesman, Tommy Harrison, told the Lexington Herald-Leader in 2009 that the company envisioned factories across the country.

WNT told the Kentucky Economic Development Finance Authority it planned to put 800,000 square feet under roof in Manchester, at a cost of $150 million, and ultimately hire 1,411 people at an average wage of $15.45 an hour.

As to how WNT would pay for the project, the KEDFA board was told by its staff in a summary document that WNT said it had "private funding — secured."

In June 2009, the board approved the company for up to $42 million in incentives — tax money it would get to keep, rather than paying to the state, if it created the required number of jobs.

In Clay County, coal jobs had dried up, officials hadn't had much luck recruiting replacements and the population was shrinking. The prospect of getting 1,400 jobs hit like a lightning bolt.

"Fourteen hundred jobs coming to Manchester! Did you ever think you'd hear that?" Carmen Webb Lewis, who was then the mayor, said in October 2009 after WNT notified the city it would build a plant there.

"The community's so excited," Lewis said.

Some local people had prayed WNT would bring jobs to Manchester, she said.

The company had wanted the city to foot the bill for all the work to prepare a site for the factory, such as engineering and excavation, but local officials said no, Lewis said.

However, the city did agree to buy the land for the factory. The deal called for the city to eventually give the land to the company if it created jobs, Lewis said.

On Oct. 22, 2009, the city finalized a deal to pay $900,000 for a total of 448 acres owned by a company headed by Circuit Clerk James Phillips, which had bought the land for $138,750 in 1996, deeds show.

The recycling plant needed about 230 acres of that land, called Y Hollow, which had been used for a coal-loading facility at one point and had rail access.

Lewis, who carried the ball in the effort to bring WNT to Manchester, arranged for a company to perform engineering work to get the site ready, and WNT hired a Laurel County company, Elza Construction, to begin moving dirt.

Others more skeptical

Officials in other towns in talks with WNT said they took a more skeptical approach in 2009 and 2010.

The company had announced plans in October 2009 to build a similar manufacturing complex in Herington, Kan., and in November 2009 reportedly said it would break ground within a month on a plant in Okmulgee, Okla.

WNT also was talking with officials in Michigan and in Laurens County, S.C.

But the deal just sounded too good to be true, officials in several of those locations said in recent interviews.

As with Clay County, some of the other locations didn't have enough workers for the plant. In some places, the plants would have needed garbage from a wide area to feed production.

John Robertson, economic development director in Okmulgee, said the business plan of proposing to build several $150 million plants at the same time seemed problematic, and he also talked with some engineers who questioned whether the process the company was touting would work.

Officials in South Carolina, Kansas and Oklahoma said they asked the company to provide details about its financial condition and its ability to pay for construction of the factories, but it wouldn't.

"There was kind of one red flag after another," Robertson said.

Janelle Dockendorf, economic development coordinator in Dickinson County, Kan., said local officials considered giving WNT land for a plant, but gave the company a deadline to provide some financial information.

The company did not provide the information, and talks stopped in mid-2010. Local officials called the company after that, but WNT officials never responded, Dockendorf said.

"Everyone that goes into a project like this needs to be asking pointed questions," Dockendorf said.

Delays and dodges

Questions and rumors about the project grew in Manchester in early 2010 as work lagged on the site.

Lewis and WNT officials cited various factors, such as delays in getting permits, Saylor said.

In late April 2010, David Bennett, chief executive officer of WNT's parent company, and other company officials came to a city council meeting to reassure people about the project.

People in the audience applauded when Lewis read a letter saying a permitting issue had been cleared up.

Then Bennett stood and said there had been a delay in the financing for the project, but that within the next two weeks WNT would be finalizing "full funding" for the Manchester factory.

The deal was not a scam, as some people were saying, Bennett said.

"This is not to come in and rip the city of Manchester off, or the county off," he said, pointing out the company wasn't getting any money up front from the community.

WNT would only profit by actually building and operating the plant, Bennett told the crowd.

"We're standing firm in our commitment to not only accomplish but to complete what we have set out to do," Bennett said, according to a recording of the meeting.

There was no work on the site after that, however, Saylor said.

Elza Construction, the company WNT hired to do excavation work, declared bankruptcy in May 2011, listing a $1.9 million loan it got to finance its work on the site as one of its largest liabilities.

Saylor, who defeated Lewis in the 2010 election, said that as far as he knows, no one from WNT has been in contact with the city since he took over as mayor in January 2011.

Unless WNT officials left a tip when they went to eat with Lewis, "they never spent a dime in this town," Saylor said.

WNT didn't build any of the plants it proposed, and the company apparently has gone out of business. The phone number listed for Global Green Holdings in Florida has been disconnected, and efforts to reach Bennett were unsuccessful.

The Topeka, Kan., newspaper reported in the summer of 2010 that Bennett and other principals of Global Green Holdings were defendants in more than a dozen lawsuits around the country, some alleging fraud.

In one, filed in June 2010 in federal court in Alabama, a lending company charged that Bennett was involved in fraudulently obtaining a $2 million loan that was not repaid.

Bennett and other borrowers pledged several pieces of land in Alabama as collateral and said a warehouse on one was leased to Wal-Mart, the lawsuit said.

However, the lease was a sham, some of the land was contaminated with hazardous waste, and the borrowers didn't even own one of the tracts, the lawsuit charged.

'They talk a good game'

These days, Saylor said he thinks the pitch by WNT to build a factory in Manchester was part of an effort by the company to court investors, by making it appear the company had a big project in the works.

Dockendorf, the development official in Kansas, also believes WNT was trying to lure investors.

"They talk a good game," she said.

Lewis said last week that WNT officials told her the company had a lot of investors, and that she had received assurances the city would be able to get state or federal money to help cover its costs.

The contract that called for the company to build the plant before getting title to the land protected the city, she said.

Lewis said the company's recycling idea was a good one, and she still thinks the proposal was real, though something apparently changed as it pursued the plan.

If there was a scam, Lewis said, she doesn't know what it was.

"To this day, what did he get out of that?" she said of Bennett.

Saylor and others say they think Lewis was honestly motivated in chasing the jobs.

However, Scott Madden, who is now the city's attorney but was not when Lewis was meeting with WNT, said he could not understand why more wasn't done to check the financial condition of WNT before buying land and hiring an engineering firm.

Robertson, the development official in Oklahoma, said it's easy to get caught up in the lure of landing jobs for a community. Officials in Okmulgee also believed the WNT proposal was real, for awhile.

In Manchester, "Unfortunately, they just believed when they shouldn't have," he said.

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