A $4.8 million wind energy project that was formerly affiliated with the Winona County Economic Development Authority (EDA) has landed in U.S. District Court in a lawsuit seeking more than $3.3 million plus punitive damages.
South Korean turbine manufacturing company Unison Inc. alleges that it lent Juhl Energy millions in financing for the twin turbine project under the assumption that the county’s EDA would remain the owner. Winona County sold the development plans for the project in 2010, prior to the turbine construction, and after a complex series of LLC exchanges, the turbines were eventually purchased by Juhl Energy. Years later, Unison attorneys say their company has not received “a single dime” for the turbines, even after Juhl Energy was awarded $1.4 million in U.S. government stimulus money for the project.
Boyoon Choi, an attorney with Choi Capital Law, which assisted Minnesota based Dorsey & Whitney LLP in representing the plaintiff, Unison, admitted the case was extremely complex. She said her client was repeatedly told by Juhl officials that the county EDA owned the turbines, years after Juhl had taken ownership of the project. “[Our client] still thought, until recently, that it was the county that was being unreasonable,” she explained, adding that Juhl representatives had wished Unison “good luck getting payment in 20 years.”
Winona County leaders first began exploring a potential public/private partnership in a wind project in 2005. After Minnesota special legislation allowed the formation of an LLC that would couple public and private dollars for the project, the county began investing funds to formulate development plans for the twin wind turbines. Dubbed the “Minnesota Flip,” the legislation allowed the county to own one percent of the turbines for the first 10 years, with private investors owning the rest. After the first 10 years, the county would own 90 percent of the turbines.
The county worked with renewable energy developer Juhl Wind, now known as Juhl Energy Development, on plans to erect the turbines on rural property in Mount Vernon Township. But after years of planning and $150,000 in county funds spent, it became clear in late 2009 or early 2010 that some tax incentives and stimulus funds could not be applied to a project that had any public ownership. The county sold the LLC in June, 2010, to Winona Wind Holdings, another LLC formed by Bartly J. Loethen, an attorney affiliated with Juhl Energy, also a defendant in the suit.
The county was reimbursed for some of the money it had spent on development plans, but lost $45,000 in the deal.
According to court documents, Unison entered into an agreement to lend Juhl Energy $2,574,000 to fund the purchase of the turbines in April 2010, and the plaintiffs allege the financing agreement was made on the defendants’ representation that the county EDA would remain the long-term owner of the project. A financing agreement was signed by Winona County Wind LLC, at the time still owned in part by the EDA. Court documents indicate that the terms of the agreement required Winona County Wind to refrain from entering into any agreement relating to the financing, development, or ownership of the project without Unison’s written consent.
Eleven days after the financing agreement was signed, Loethen allegedly formed the LLC Winona Wind Holdings, and by June 1, 2010, the county’s LLC was sold to Winona Wind Holdings. The suit alleges that Unison was never told of the exchange, and was continually assured the county was an owner of the project.
Several more complex LLC exchanges took place over the next few months, according to court documents, and Juhl Energy eventually took ownership of the entire project.
The suit accuses Juhl Energy Development, Juhl Energy Inc., and Juhl employees Daniel Juhl, John Mitola, and John Brand, along with attorney Bartly Loethen and his wife, Audrey Loethen, and Jeff Bendel, of failing to abide by the terms of the financial agreement that required permission from Unison before financial or ownership transactions took place. Additionally, the suit alleges that the company misrepresented the ownership of the turbine project and failed to make any payments on the turbines.
“Our client would never have financed the turbines if they had known the county was not the owner,” said Choi. She said the complex series of transactions was a legal “soap opera,” adding that attempts to settle the suit with Juhl Energy at a sum less than the $3.3 million – including interest – it believes it is owed, has been fruitless. “They demanded a 50 percent discount,” she said.
Juhl Energy leaders were unavailable for an interview Friday, but Juhl Wind President John Mitola released a short statement about the lawsuit. “It should be noted that this is the first major lawsuit that we have faced in our long history!” he wrote. “And this will have no impact on service at our Winona site. This suit happens to come from a company that has almost zero presence in the U.S. from a far away place who seems to have almost a more scarce understanding of U.S. contracts and law [sic]. We fully expect to prevail.”
Choi said that after her research, she believed that Winona County itself was not at fault for the alleged fraud. She said she hoped to uncover more information about the complex LLC transactions and agreements, as well as a $3.5 million promissory note given to Juhl from Winona County Wind LLC – allegedly signed by Loethen while the county still owned the LLC – during the discovery portion of the upcoming trial.
Winona County Administrator Duane Hebert was unavailable for comment for this story, and former EDA director Linda Grover, who oversaw the project, no longer works for the county.
Commissioner Marcia Ward, who voted against the project and objected to various aspects of the public/private partnership that made financial and other information private – even for County Board members – said she was concerned the ordeal and lawsuit would tarnish the reputation of the county.
“I questioned the project from the get-go,” said Ward, “and was denied information all along. I never got questions answered, and gee, I wonder why, now.”
The project, said Ward, should have been a private sector investment in the first place. “I don’t think we should be using taxpayer dollars to experiment in the wind industry.”
According to county staff, Winona County has the “first right to purchase” the turbines once the energy credits expire.
The civil complaint requests a jury trial to resolve the allegations. Keep reading the Winona Post for more on this story.
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