Cypress mill at center of tangle over loan default
A failed cypress mill in Tangipahoa Parish is at the heart of a legal battle that could determine whether the state is on the hook for millions of dollars in debt incurred by private industry.
At issue is whether former state Agriculture Commissioner Bob Odom should have sought other state officials’ approval in giving the state’s backing on more than $14 million in debt for the cypress mill and for a now struggling cane syrup mill in Lacassine.
Few knew about the guarantees until one of the loans defaulted after Odom left office.
Both mills were run by private companies. One of the companies defaulted on a state-backed loan. Payments still are being made on another loan and other borrowing.
Odom’s successor, Mike Strain, said he inherited the problem when he took office in 2008.
“If you want to know what keeps me up at night, that is some of it,” Strain said. “Because I don’t have the cash to pay these.”
Odom, who has battled health problems since leaving public office in 2008, was the commissioner of agriculture and forestry for nearly 30 years. He drew criticism for using department employees to double as construction workers on a number of projects, including the cane syrup mill near Lake Charles. He also apparently failed to apprise other state officials that he was backing debt for private business ventures.
Reached at his home in Zachary, Odom said he does not remember the guarantee of the loan for the cypress mill.
“That doesn’t ring a bell,” he said.
Four years after Odom left office, the state still owes money on loans or bond sales that he guaranteed. The debt at one time exceeded $14 million. Outstanding is:
e_SBlt $3 million for a loan made by Texans Credit Union to Louisiana State Cypress for the cypress mill that now is idle in Tangipahoa Parish.
e_SBlt $2.7 million for a loan made by Jeff Davis Bank to Lake Charles Cane Cooperative for the cane syrup mill in Lacassine.
• $3.5 million for a bond sale benefiting the Lacassine mill.
Louisiana Green Fuels, headed by Columbian brothers, is buying the cane syrup mill from the state. Lake Charles Cane Cooperative is a minority partner in the project. The mill is idle four years after the state built it with visions of turning it into an ethanol plant.
Payments are being made on the debt tied to the cane syrup mill. However, those payments often have come after delays or extensions. The state is supposed to receive a $2.9 million mortgage payment at the end of the year.
Louisiana State Cypress failed not long after Wal-Mart decided in late 2007 to stop buying Louisiana cypress mulch.
The company stopped making loan payments to Texans Credit Union. The credit union, which now is in conservatorship, sued Louisiana State Cypress as well as the state in 2009 demanding payment of the remaining balance on a $3.2 million loan.
The state’s attorneys want the lawsuit dismissed, arguing Odom failed to go to the State Bond Commission, which oversees state debt, for authorization to guarantee the loan.
In the meantime, the state is holding on to the cypress mill, which overlooks waterfront property in Roseland. The mill’s saw blades are rusting. Trash litters the property. A vacant patrol car sits just beyond the locked gates to deter looters.
State Rep. John Bel Edwards, D-Amite, said the state’s efforts to disavow the loan undermine the state’s business climate. He said the state should change course.
“It’s terribly unfortunate that Louisiana took the position that it’s not obligated to honor the guarantee it made,” Edwards said. “It’s a black eye on the entire state of Louisiana.”
Strain said he tried twice to convince the Legislature to pay the debt. He said he was turned away both times because the state lacked the money.
He said he later realized that the loan guarantee never went before the state Bond Commission. He said that leaves him in limbo.
“I need resolution. Tell me one way or the other whether these are valid guarantees,” Strain said.
State Treasurer John Kennedy, who heads the state Bond Commission, said the guarantees are not valid. He said the banks should never have accepted the state’s backing without further authorization.
“These are debts and they’re public debt and all public debt ... has to be approved by the Bond Commission,” he said.
Lobbyist Randal Johnson, who was Odom’s top aide, said the former commissioner engaged in economic development activities to promote the agriculture industry.
“In all cases, the appropriate rules, laws and regulations were followed,” Johnson said.
The issue now is before the courts.
State District Judge Tim Kelley with the 19th Judicial District disagreed in a ruling last year that the loan guarantee is unenforceable.
“As painful as it is ... I think that they’re entitled to enforce the guaranty,” Kelley concluded, according to a transcript.
The 1st Circuit Court of Appeal agreed with Kelley’s ruling. The state is appealing to the Louisiana Supreme Court.
Even if Texans Credit Union ultimately prevails, collecting could be tricky, Kelley noted in his ruling.
Separation of power issues prevent the courts from ordering the Legislature to appropriate money.
“I can’t put the governor in jail,” Kelley told an attorney for Texans.
Strain said he does not have the money within his department to pay the debt.
“If it’s determined that it is a valid guarantee, OK, then we need to settle,” he said. “I’ve asked for the money multiple times.”