Attorney General's News Release

February 4, 2005

Defunct Scott County chip mill ordered to pay $393,000 to state for failing to keep jobs as required by block grant

Jefferson City, Mo. — A Scott County judge this week ordered a now-closed chip mill to repay the state of Missouri almost $400,000 for not keeping jobs promised under the terms of a community development block grant.

At the request of Attorney General Jay Nixon, Circuit Judge David Dolan ordered Canal Wood Corp. to repay the original block grant of $193,588 from the Missouri Department of Economic Development. The judge also ordered Canal Wood to pay an additional $200,000 for not keeping the promised jobs.

The 1997 contract provided Canal Wood with $193,588 in infrastructure grants. 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 coming from people classified as "low and moderate income," for a period of at least five years.

If the company breached the contract, it was obligated to pay the contract price, plus $10,000 for every employee not hired for five years. Canal Wood ceased all operations in February 2001, less than four years into the contract.

Nixon sued in May 2002, asking that the state be reimbursed for the amount of the contract and the $10,000 for every employee not hired for five years. Last March, Nixon filed a motion for summary judgment on the case, asking the court to issue a ruling based on evidence presented to that point. Judge Dolan held a hearing on the motion last September and granted the motion through his Jan. 31 order.

"Economic development grants and loans from the state are a two-way street," Nixon said. "The benefits of these grants must be matched with job creation and retention. If not, these companies are failing in their obligation to the taxpayers and must repay the money."

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