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Independent committee expected to look at veneer mill dealings

Posted: Friday, May 31, 2002

KETCHIKAN (AP) -- Ketchikan Gateway Borough Mayor Jack Shay plans to go along with the Borough Assembly on an investigation of the borough's dealings with bankrupt Gateway Forest Products, which built a veneer mill in Ketchikan only to run out of money just as production began.

The borough put about $15 million into the venture before it collapsed.

Following a 4-2 vote by the assembly earlier this month favoring such an investigation, Shay said he considered vetoing the action.

''Then I thought, 'Yeah, let's clear the air,''' Shay said, and changed his mind about the veto. ''If there was any wrongdoing, let's take care of it.''

Shay has a motion prepared for the assembly's meeting Monday. It would authorize him to appoint a committee that would then select a forensic accountant, an attorney and perhaps other parties experienced in reviewing business records. Investigators could spend up to $15,000 on the investigation, he said. The assembly could appropriate more money as needed, said the mayor.

Shay said at least one member, if not all members, of the independent committee should be from outside Ketchikan.

Assembly Member George Lybrand said his motive in suggesting the investigation originally was to learn whether the borough could recover any of the money.

Gateway borrowed $7 million from the borough's economic development fund to build the mill. The borough subsequently loaned Gateway an additional $2.5 million and spent more than $5 million to purchase company debts owed to local companies.

Gateway, set up in 1999, filed for bankruptcy protection from creditors shortly before beginning veneer peeling operations last year. The company was unable to arrange new financing and its bankruptcy protection was ended this spring. Gateway's equipment and other portable assets are set for auction in July.

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