news story / By Heidi Walters

Pulp Friction

Evergreen Pulp’s fraud lawsuit against former CEO inches toward trial

(Nov. 15, 2007)  It was early January 2005, and things were a little shaky to say the least out at the pulp mill on the Samoa Peninsula. Stockton Pacific Enterprises, Inc., then-owner of the mill, was sinking fast into the surf under nearly $30 million debt to investor PPM America, which had loaned SPE the money to buy the mill in 2003. It owed several million to suppliers. It had but pennies in the bank. And it faced grave accusations of environmental violations.Then the mill shut down, 100 employees were laid off, and in lieu of the steady plumes of white steam issuing from its stacks speculation rose: The mill would stay shut forever. The mill would be bought by its employees. The mill would be purchased by outside interests.

In the end, on Jan. 20, Evergreen Pulp, Inc, a subsidiary of Chinese paper manufacturer Lee & Man, acquired the PPM note, thereby becoming the mill’s new owner. It would acquire the rest of the mill’s assets by that fall.

GALLERY >

But according to a lawsuit filed on Aug. 3, 2006, it was during those uncertain days in early January 2005 that three of SPE’s top managers wrongfully paid themselves by allegedly transferring $250,000 into a bank account in Salt Lake City, Utah, through fraudulent means. The accused — former SPE Chief Executive Officer Steve Fleischer, former SPE Chief Financial Officer Bruce Uhren and former SPE Vice President Alan Lindgren — have denied the allegations. In addition, Fleischer and Uhren filed cross-claims accusing Evergreen, among other things, of negligence, fraud and breach of contract.

A trial in the case had been scheduled to begin Nov. 19, but on Tuesday morning Superior Court Judge Bruce Watson agreed to a request from Fleischer to continue the trial to a later date yet to be determined. (Fleischer, who was not at the hearing, last week said he is in the process of getting a new attorney up to speed on his case, after parting ways with his attorney, Lara DeCaro.)

Evergreen’s case against the mill’s former managers is a curious digression from the usual reasons the company has made headlines since acquiring the mill — for repeated delays in dealing with assorted pollution violations. These allegations of funny money handling by former top dogs have been kept pretty well under wraps.

Evergreen’s complaint begins by establishing that when SPE borrowed money from PPM, the loan was subject to a security agreement that “granted a lien on … all accounts.” Then it lays out the crux of the case: “On or about January 13, 2005, at a time when Stockton Pacific Enterprises, Inc., was insolvent, defendant Uhren directed Jiki Bertsch-Betts, the Controller for [SPE] to wire transfer $250,000 to Key Bank, Salt Lake City, Utah…. No explanation was given to Ms. Bertsch-Betts as to the purpose of the wire transfer … and said account was not previously used, and had never been used, for purposes of payroll payments of [SPE].

“On January 20, 2005, Evergreen Pulp, Inc … purchased the August 15, 2003 note and security payment from PPM pursuant to assignment which was approved by defendant Fleischer on behalf of [SPE].

“On or about that same day defendants Fleischer, Uhren and Lindgren made wire transfers into their private accounts from [the Key Bank account] as follows:

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