The businessman who acquired the former Magnetation and Essar Steel Minnesota properties is facing two federal court challenges, and an objection has been filed in the final Magnetation settlement.
Millionaire Tom Clarke has missed a mandatory tax payment at Magnetation’s biggest asset: the new pellet plant the company built in Reynolds, Ind. According to documents filed April 17 in U.S. Bankruptcy Court for the Minnesota district, that’s a default. Documents say, based on an agreement between ERP and White County, $517,646 is owed for real property taxes and $5.6 million for personal property taxes. White County is asking the court to order immediate payment. A hearing is scheduled May 8.
At a hearing scheduled Thursday in St. Paul, the court will review a motion from the U.S. Trustee in the Magnetation bankruptcy. In an April 13 filing, Trustee James L. Snyder objected to a motion filed by Magnetation LLC that would dismiss the Chapter 11 case. Snyder indicated he does not believe the distributions would be fair because it gives preference to some creditors’ claims over others, particularly to “professionals.” Language in the motion suggests creditors might do better under a Chapter 7 bankruptcy scenario.
The battle between Cleveland Cliffs and Clarke is also reaching new heights in yet another lawsuit.
When he purchased the assets of Magnetation and Essar Steel Minnesota, Clarke became a competitor of Cliffs. The ongoing lawsuit, which involves the 2015 purchase of two Cliffs coal mines by Clarke and his associates, has become intertwined in Clarke’s Minnesota business activities.
In the ongoing lawsuit, initially filed during 2016 in Delaware Federal Court District, Cliffs has expanded its accusations to include criminal activities by Clarke. The accusations reiterate earlier Cliffs’ claims that it has been defrauded of funds and assets that are owed to them. It goes on to contend that Seneca, which was formed by Clarke and his associates to purchase the coal mines, is “laundering” Seneca funds and other company assets “into a new criminal enterprise (called) Mission Coal Co. LLC.”
“Defendants carried out this fraudulent scheme through a sustained pattern, over an extended period of time, of illicit and illegal transfers of Seneca’s assets and funds to their own personal accounts and to other legal entities that they controlled,” Cliffs said in an April 9 filing. The company went on to allege “the scheme, to which all Defendants agreed, was hatched by Thomas Clarke. … it comes from a playbook that he has developed over the course of his career.”
Similar accusations were aired in the March 21 edition of Bloomberg BusinessWeek by Clarke’s ex-wife Linda, who had been his business partner. The story said:
In a postdivorce lawsuit, she accused him of shifting money among corporate entities he controlled to keep it from her.
“Mr. Clarke has a history of not paying vendors,” one of his ex-wife’s filings says. “He manages to keep the companies going from cash flow, one company constantly borrows from the other to stay afloat.”
Cliffs contends that none of the funds recently transferred from Seneca were reserved for the “millions of dollars that Clarke has admitted Seneca owes Cliffs.”
The law firm representing Clarke and Seneca has filed a motion challenging federal court jurisdiction over the matter and asked for dismissal of the lawsuit. In a March 22 letter to Judge Gerald A. McHugh, counsel representing Clarke and Seneca dubbed Cliffs’ arguments “utterly irrelevant.”