Mississippi Attorney General's office settles lawsuit over failed beef plant for US$3.9M; state lost more than $40M on project
April 17, 2012
– Mississippi Attorney General Jim Hood said Monday that he's settled the state's 2007 lawsuit against the firms that built a financially disastrous beef plant in the Yalobusha County town of Oakland.
Hood said the state recovered $3,965,000 from an insurer for Georgia's Facility Group, which was hired to oversee construction of the plant. Of that amount, $65,000 will go to an unpaid conveyor belt contractor, leaving $3.9 million for the state.
Federal, state and local subsidies for the project totaled at least $50 million, including more than $40 million in state loan guarantees. The plant operated only three months, and never reached its full capacity, before the business closed in 2004, laying off 400 people.
Windsor Quality Foods, a frozen-foods firm, bought the plant and now employs 300 people.
The state paid the Facility Group $6.57 million either directly or indirectly. The company was hired to manage construction of the plant, which was going to slaughter and butcher cattle, after Tennessee businessman Richard Hall ran into trouble. At least another $43 million in federal, state and local aid was provided to the project, although some accountings put the total figure much higher.
The state's case had been set for trial March 19, after two failed mediations.
Hood said the state is collecting the maximum available from the Facility Group's insurer. The company and its officers had little money left because their business collapsed after the deal.
Six people went to jail after a federal investigation, including three Facility Group leaders — Robert L. Moultrie, Nixon E. Cawood and Sean Carothers. Mississippi earlier recovered $550,000 from the federal case.
Facility Group had a $5 million insurance policy covering errors and omissions by architects and engineers. But the services of defense lawyers were being subtracted from the $5 million, meaning that even less would have been left for the state following a trial.
"A settlement was in the state's best interest because the maximum recovery available would have continued to diminish while awaiting trial and likely appeal," Hood said in a statement.
Even worse, the private lawyers hired by the state had said they planned to present evidence that Facility Group had hidden problems, defrauding the state. The insurer owed nothing if fraud was found.
The project was strongly supported by Republican Agriculture Commissioner Lester Spell, then-House Speaker Billy McCoy, D-Rienzi, and current House members Steve Holland, D-Plantersville, and Tommy Reynolds, D-Charleston.
Private law firm Burr & Forman and experts they hired are in line to collect $420,000 for handling the case for the state under an appropriations bill now awaiting action by the governor. The firm is being paid on an hourly basis, Hood said. Many Republicans have attacked the Democratic attorney general for assigning cases to outside lawyers on a contingency basis, where they collect a share of any judgment. GOP leaders are considering legislation to limit Hood's power over outside lawyers.
Hood said that in this case, the state had to look to outside lawyers because civil lawyers working for his office are inexperienced in construction litigation.
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