BIPCo sale faces continued litigation
It appears as though the sale of Block Island Power Company assets to the Block Island Utility District will continue to face ongoing litigation.
That is what the attorney for minority shareholder Sara McGinnes said after a brief but contentious shareholder meeting on Monday, Dec. 3. The meeting concluded after a 2-1 vote to approve the sale of BIPCo assets to the Block Island Utility District for $5.8 million. McGinnes was the dissenting vote.
After the meeting, when asked if the issue of the sale was headed to court, attorney Mark Hagopian said, “Absolutely.” He said the ongoing case that McGinnes has already filed in Superior Court would continue. Hagopian said that the BIPCo majority shareholder, which is the town, has continued to withhold certain critical financial information from his client, including how the $5.8 million valuation of all the assets was arrived at, as well as how much debt BIPCo owes and how that debt will be paid off once the asset sale is complete.
The attorney for the power company, Kathy Merolla, said during the meeting that all available financial materials have been distributed to both the majority shareholder — which is the town — and to the minority shareholder, which is McGinnes. Merolla also contended that the details of the valuation that McGinnes herself had done, which concluded that the power company was worth $8.7 million, had been withheld, despite numerous requests that it be disclosed to the majority.
There were three shareholder representatives at the meeting on Monday: Ken Lacoste, André Boudreau, and McGinnes. There were also the two attorneys, Hagopian and Merolla.
Lacoste made the motion to approve the sale for $5.8 million, but before the vote was taken, Hagopian said, “I have a number of questions that I’d like to ask.”
Hagopian’s questions were primarily about how the $5.8 million valuation of BIPCo was calculated, and how the company’s debt would be paid off. Not receiving what he felt were satisfactory answers, just before the final vote to sell the assets for $5.8 million was taken, Hagopian asked if his client could “present to you our valuation so that we can try to avoid — what I think is going to happen — litigation over fair market value?”
Merolla said that information had previously been requested, but had been withheld.
The sale was then approved by a 2-1 vote, with Lacoste and Boudreau voting yes and McGinnes dissenting.
Prior to the vote, Hagopian asked a series of questions.
“What debt would be paid by BIPCo and what are the specific amounts,” asked Hagopian.
“I don’t have specifics at this time,” said Lacoste.
“Do you know what liabilities will be remaining — what the remaining liabilities are and what the categories are,” Hagopian asked.
“All of those would be in the financial statement,” said Merolla.
Hagopian then asked about an item termed “a contingent liability” line item for $300,000. “What went into that decision?” Hagopian asked.
Lacoste said in response that this was a “contingent liability — a buffer — that was a decision of the majority of the board.”
Merolla then interjected and said all of this information had been provided to both the majority shareholder, which is the town, and the minority shareholder, which is McGinnes. “The minority has all the information the majority has,” she said.
Hagopian then asked about what kind of “cash on hand” BIPCo had, to which Lacoste responded that the topic “had not been discussed.”
“Have you discussed planned distributions to shareholders?” Hagopian asked.
“Not at this time,” said Lacoste.
When Hagopian persisted, Merolla interjected, “This is a stockholders’ meeting. This is not a deposition.” She also said that Hagopian was essentially asking Lacoste to “anticipate what the (BIPCo) board is going to do” in terms of its financial matters. She said the issue at hand was the sale of BIPCo assets for $5.8 million “and to direct the board to carry that out and then determine terms and conditions.”
Hagopian said the vote would prevent his client from being privy to those later “terms and conditions.” He also said that the lack of information would prevent his client from making an intelligent decision on the sale. Merolla said the majority shareholders “were well within their rights to determine the terms of the sale.”
When Hagopian asked again about debt and distribution of debt, Merolla said the “$5.8 million is all laid out and that is what they are voting on today.”
Hagopian made one final attempt to ask if, “under the law, have you undertaken an analysis of what that fair value is” of Sara McGinnes’s share.
“I can’t speak for the board,” said Lacoste.
“Then the answer is no,” said Hagopian. “No analysis of fair value has been done or you don’t want to disclose it to me.”
The vote was then taken, after which Hagopian said the issue will continue to be litigated.