A new twist in the Essar Steel Minnesota bankruptcy pits the Nashwauk firm against its parent, the giant Essar Steel Global, in a $1.1 billion lawsuit.

Essar Steel Minnesota LLC (ESML) contends money intended to develop the Nashwauk mine and processing plant was sent to Essar Global, which redirected it into numerous other corporate developments.

“…of the over $1.1 billion ESML paid to Essar Affiliates, almost half (approximately $500 million) was not even used on the Project even though it was needed to complete engineering, procurement and construction,” ESML, the plaintiff, said in its legal complaint, which was filed Wednesday in Federal Bankruptcy Court, Delaware.

Essar Global did not provide the equity needed to complete the project in accordance with its obligations under an equity contribution agreement, ESML contends.

The defendants include Madhu Vuppuluri, formerly president and CEO of ESML.

Beyond failing to complete the project, units of Essar Global violated their obligation to complete work and procurement is free of liens, ESML contends. There currently are $60 million in liens based on the failure to pay subcontractors, the plantiffs said.

Further, ESML alleges Essar Global paid internal units of the corporation to perform services that were not provided. The parent firm also provided structural steel that was too flawed to be used, and a design that was insufficient to handle Minnesota snow loads, ESML said.

“Essar Global and multiple Essar Affiliates, often acting in concert, funneled money paid to them for Project uses to wherever it was deemed to be needed by those in control of Essar Global and Essar Affiliates, without regard for corporate structures, operative contracts, or the law – or any repayment ability,” the plaintiffs allege.

Once completed and operating at full capacity, ESML was to produce seven million tons of pellets annually. It is believed the company needs another $800 million to get its processing plant up and running.