Attorney General's News Release

May 13, 2002

Nixon sues chip mill that reneged on contract to create, maintain 20 new jobs as part of $193,000 block grant

Jefferson City, Mo. — Attorney General Jay Nixon today filed a lawsuit to recover more than $200,000 from a chip mill business that closed its facility in Scott City last year. Nixon said Canal Wood Corp. reneged on a contractual obligation to create and maintain at least 20 new full-time jobs after benefiting from a community development block grant made by the Missouri Department of Economic Development to Scott County.

The state approved Scott County's block grant application in 1997 to cover expenses for water, street and sewer construction costs for Canal Wood's chip mill plant in Scott City. As part of the agreement, Canal Wood promised to create at least 20 full-time jobs at the facility, with at least 51 percent of the jobs to go to people coming from families classified as "low and moderate income" as defined by the federal government.

Canal Wood also was contractually obliged to keep the jobs at the facility for at least five years. If the corporation breached the contract, it was obligated to pay $10,000 per job to the state of Missouri, plus interest.

Nixon said Canal Wood closed its Scott City chip mill in February 2001, less than four years after the agreement was made, terminating all 20 jobs. In addition, monitoring by the Department of Economic Development determined that less than a quarter of the jobs were filled with people who met the income guidelines.

"Economic development grants and loans from the state are a two-way street," Nixon said. "By reaping the benefits of this block grant to construct its chip, Canal Wood had an obligation to taxpayers to create and keep jobs in return. They failed in their obligation, and now they need to repay that money."

Nixon is asking the Scott County Circuit Court to order Canal Wood Corp. to pay the state $10,000 per job, plus interest, as well as costs incurred by the state in bringing the lawsuit.

Inquiries from consumers should be directed to consumer@ago.mo.gov or 1-800-392-8222 (from within Missouri) or 573-751-3321 (outside Missouri).

All media inquiries should be directed to Press Secretary John Fougere.

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