The contract between the City of Evansville and Earthcare Energy that was signed by Mayor Winnecke on on behalf of the City and Ken Haney as Chairman and CEO of Earthcare Energyon March 1, 2012 is for the most part standard and easy to understand. There are some items in the contract that merit further review based on the fact that it is now widely reported that the deal is dead.
The first revelation is on page 5 where it clearly states that “Earthcare shall have a period of thirty (30) days to cure such failure, default, or breach.” Contrary to the sentiment in Evansville this deal may not be dead yet. Earthcare may well come back to assert that they have the cure to the items that the city has stated that they are in default for.
The City of Evansville specifically has stated that the default was because of two deficiencies.
The first was Earthcare’s failure to secure a DOE guarantee for the $5 Million loan that the City was committing to make to Earthcare when they had satisfied the pre-funding obligations. Obligation (1) reads “Prior to consummation of the loan transaction contemplated hereby, Earthcare shall APPLY FOR and take all actions necessary to secure from the DOE a loan guarantee of the Loan to be made by the City to Earthcare.” On page 2 of the contract it explicitly states that “The parties hereto both agree and acknowledge that securing a DOE loan guarantee may not be feasible prior to the execution of the agreements” and if it is not secured Earthcare will keep working diligently to try to get a DOE guarantee.
Will making an application for a loan guarantee be that difficult to do to cure Obligation (1)?
With respect to Earthcare’s failure to deliver to the City of Evansville the “license agreement” with Langson Energy on page 6 under the section titled “Conditions to Closing”, Condition #7 reads as follows: “Prior to the consummation of the Loan transaction, Earthcare shall prvide to the City A LETTER from Langson Energy addressed to Mayor Winnecke which outlines the agreement between Langson Energy and EarthCare with respect to Langson Energy’s intellectual property.”
There is no reference to any license agreement that was cited yesterday as reason for default. Of course the term “intellectual property” could and may be interpretted as meaning both the license agreement and the patent that has been represented as having been applied for. The question will be, can Earthcare come back during the next 30 days with a “license agreement” or a “Letter from Langson Energy” as the contract states and claim that they have cured the deficiency?
What is NOT in the contract that is somewhat confusing is any “Condition” or “Requirement” that the Evansville City Council has to vote to approve the loan. Quite frankly, there is no reference to the City Council anywhere in the contract.
There are other details that seem to have been distorted by public statements including the alleged $2.5 Million payments to be made to the City of Evansville by Earthcare in a profit sharing arrangement. The contract has no reference to any profit sharing but does refer in Article 8 of the Obligations of Earthcare to a $0.005 per kWh fee to be paid to the City by Earthcare for power generated under PPA’s with Vectren or other customers for a period of 15 years and not to exceed a total of $32 Million. A quick calculation reveals that to capture the full $32 Million that Earthcare would have to generate 6.4 Billion kWh through their devices and sell it back to utilities.
Perhaps in view of yesterday’s results the most haunting words in the contract are the words that comprise Item 7 of the Miscellaneous Items.
“Earthcare hereby acknowledges and agrees that (a)the City would be irreparable injured in the event of a breach by Earthcare of its obligations hereunder, and (b)monetary damages may not be an adequate remedy for the City in the event of a beach by Earthcare hereunder and (c) in the event of a breach by Earthcare hereunder, the City shall be entitled to seek specific performance or other injunctive relief with respect thereto (without posting of a bond), in addition to any other remedy that the City may have in equity or at law.”
Well, the breach is upon the City of Evansville and there is now 30 days for Earthcare to cure such breaches. Hopefully, for the sake of the people of Evansville this shall pass without further discourse. There is however plenty of opportunity for discourse if either party wishes to be discourseful.
On Monday night City Councilwoman Stephanie Riley will be introducing a resolution to rescind their loan approval and the Council will once again vote for or against a loan to Earthcare. The omission of Council approval as a condition of consummation is bumfuddling. So what if they rescind it, does that not just turn the clock back to when this was signed in the first place?
Of course the burning question is how was the City of Evansville able to justify making a $200,000 loan to Earthcare through the DMD? It would seem since this contract calls for a $5 Million loan that the City has violated its own contract by making that loan. It will be interesting to see what the $184,000 of those funds that have not yet been recovered were used for.
All of this could have been avoided by requiring that the LICENSE AGREEMENT be on file before signing this contract. Please Evansville, learn something about vetting and due diligence before doing another thing involving the use of taxpayer dollars. Put a process in place that makes sense and make sure that the implementation is done in a way and by people who do not have the potential for conflicts of interest.
Source: Contract Supplied to the CCO by the City of Evansville on May 9, 2012 after a press conference regarding the default of Earthcare
So what happens if Haney and team show up with the goods and demands a check?
Significant material misrepresentation on Earthcare’s part is the torpedo that will sink their boat and this deal.
I would still like to know WHO BROUGHT THESE PEOPLE TO EVANSVILLE!
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This could get really ugly and very expensive. Looks like a slop job right from the first day.
If EarthCare or any of its officers have any liquid assets I am sure there is a long list of people who would like to know that. Liens, judgements, back taxes and all that sort of stuff can eat up assets fairly quickly when the right people find out about your new found money.
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I still say that email Haney sent to the city council should have been a deal breaker. I wouldn’t loan money to somebody that sent something like that if they had the cure for cancer! How can the council and Winnecke be so inept?
GAGE and DMD? What could go bad.
https://city-countyobserver.com/2010/12/17/the-decision-about-barnett%E2%80%99s-salary-to-be-made-next-week/
https://city-countyobserver.com/2010/09/04/breaking-news-indiana-state-board-of-accounts-findings/
Follow the money.
Who were the people that approved the advance $200,000 loan to Earthcare?
Are there any obvious conflict of interest with board members approving this loan?
The City Attorney needs to retire along with his buddy Richard Lugar!
He has cost the taxpayers of this community more than $200,000 todate. I hope he has errors and omissions insurance because he shall need it because of his bad legal work on this issue.
Ted Ziemer,City Attorney of Evansville should submit his resignation because he failed to be a good steward of the public funds.
I have always been a supporter of Ted Ziemer.
Starting today he can forget to ask me to support his favorite political candidate for any public office.
What he has done to the taxpayers of this community concerning his legal advice to Earthcare is wrong. I throught he was next to a genius concerning governmental law. Wow, did I have that all wrong! I’m ashamed of you Mr. Ted Ziemer! YOU AND THE REPUBLICAN PARTY HAVE LOST FUTURE POLITICAL DONATIONS FROM ME AND MY WELL CONNECTED FRIENDS! Oh, you and my party have lost big future political donations because of your stupid legal advice concerning this issue!
Mayor W., before it’s to late, please re-look at the people who are giving you “GOOD PUBLIC POLICY” advice!
I was a strong supporter of yours in the election for you to become Mayor of this fine city.
I don’t know Mr. Ziemer, Evansville City Attorney, but he has hurt you concerning the legal advice he has given on this Eartcare deal.
The Courier just posted where the City got the money to make the $200,000 advance. You are not gonna believe who placed the votes to hand this money to Earthcare. Read it for yourself. This is quite disappointing.
http://www.courierpress.com/news/2012/may/10/earthcare-followup-herppppp/
a veritable rogues gallery of local hob nobbers. what shall we do?
So, how many of you are having “buyer’s remorse” towards our new mayor?
I didn’t vote for him. Mayor Rick Davis sounds a lot better, especially after this whole crazy deal. I wonder if Davis is that easy to either fool or buy, whichever happened here.
It is interesting to me that there was a rush to do this deal. I know for a fact there were legitimate concerns raised by the city-couty observer and certain council members. The question is Why? What was the hurry? Who wanted this done so badly that we couldn’t wait to make sure before signing a contract?
[…] Dissecting the Contract between the City of Evansville and … The contract between the City of Evansville and Earthcare Energy that was signed by Mayor Winnecke on on behalf of the City and Ken Haney as Chairman and C. Vandy Watch Dog on May 10, 2012 at 00:00 pm. Ted Ziemer,City Attorney of Evansville should submit his resignation because he failed to be a good steward of the public funds. Reply. The Blogger on May 10, 2012 at 00:00 pm. I have always been a supporter of Ted Ziemer. Starting today he can forget . […]
Has anyone in this current city administration ever explained what the $200,000. loan was for? Who asked for it, and why?
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Could it be they needed money from us to sue us?
How much of that did they fork over to Kunkel for the lease? Knowing that would give you some insight into how serious they were about a long term commitment.
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Reader’s Poll:
“The City Attorney says that Earthcare has missed a loan payment. Now What?”
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Reader’s Want To Know Poll:
The County Auditor’s Office says that Kunkel has missed property tax payments on several properties. Now What?
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I guess it is just a matter of who is stiffing you, right?
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Economic Development Administration
Contact:
http://www.eda.gov/contacts.htm
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Contact these people and inform them that the City of Evansville has blown through $200,000. of their Grant Funds and has zip, zero, nothing to show for it.
Ask them if this is the intended purpose for which these funds were granted to Evansville.
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