Drew Wrigley: Case Closed

As I write this Friday, it has been exactly 10 years and 27 days since four western North Dakota counties — Billings, Slope, McKenzie and Golden Valley — filed a lawsuit to try to get access to section line roads inside four parcels of land being protected by the U.S. Forest Service, the federal agency that manages most public lands in North Dakota. Those four parcels, about 40,000 acres of North Dakota Bad Lands, less than five percent of the million acres of Forest Service land in our state, have been protected from development since 2002 in hopes that someday they can officially be designated as Wilderness under the provisions of the Wilderness Act of 1964. Commissioners in those four counties don’t like that idea very much, so they sued the Forest Service, asking the courts to remove that protection.

Shortly thereafter, North Dakota’s attorney general, Wayne Stenehjem, joined the lawsuit on behalf of his state and took over the case from the counties. Five years of legal wrangling ensued, until finally, in the summer of 2017, U.S. District Judge Daniel Hovland of Bismarck ruled against the state and the counties, and the Bad Lands won — the four areas remained protected.

Disappointed by Judge Hovland’s opinion, the counties and Attorney General Stenehjem, who wanted in to those areas to drill for oil, appealed to the 8th Circuit of Appeals. (To be fair, Stenehjem told me it wasn’t about oil. It was about “state sovereignty.”) But after five more years of legal wrangling, in April of this year, the 8th Circuit upheld Hovland’s decision. The Bad Lands won again.

But there was one more avenue for the North Dakota attorney general to explore: another appeal, this time to the U.S. Supreme Court. But by this time, Stenehjem had passed, and there was a new sheriff in the Attorney general’s office, Drew Wrigley. He got to decide whether to appeal.

A couple of weeks ago I called the clerk of the 8th Circuit Court of Appeals in St. Paul and asked if there had been an appeal. She told me that the time had expired for the state to file an appeal and that the case was over now. Wow! Another victory for the Bad Lands.

Oh, and also a victory for two conservation organizations, North Dakota’s Badlands Conservation Alliance and the Sierra Club, a national organization, which had filed amicus briefs in support of the Forest Service’s right to keep the areas roadless and remain “Suitable for Wilderness.” Hooray for them, too!

When I learned that the state had decided against any further appeals, I fired off an e-mail to the new sheriff, thanking him for his wise decision not to waste any more of the state’s time or money on this case.

Within a few hours, my phone rang, and the voice said, “Jim, its Drew. I’m calling to thank you for your note.”

Drew and I have been friends in passing for many years. We had a nice conversation for about five minutes. He said, basically, you win some and you lose some, and they lost this one. That was it, as far as he was concerned.

Well, thank you, Drew Wrigley. You’re starting off your new career as attorney general on a high note, as far as I am concerned.

Case No. 1:12-cv-125. Closed.

Meridian Energy Troubles Continue

Now, then, here’s a story about a case that is still open. It’s not a lawsuit — yet. But it could be soon. It’s the strange case of Meridian Energy Group’s Paycheck Protection Program loans. I’ve written about it before. You remember Meridian Energy Group. Its the group that wants to build an oil refinery next door to Theodore Roosevelt National Park.

The PPP was a government program to help employers keep their employees during the COVID pandemic. The way it worked was a business went to a bank, certified that it had “X” number of employees and that it needed help paying them. The bank made the loan and sent the bill to the government, which paid off the loans. During the first two years of the program, 4,318 banks made 11,468,410 loans to large and small businesses. The average loan was for $69,113, and the average number of employees at those companies was eight.

Of those loans 51,528 were made in North Dakota, totaling $2.9 billion, an average of $56,162, and the average company size was six employees.

Meridian Energy Group is technically not a North Dakota company — yet. Its headquarters are a mailbox in a minimall mail drop in California, and its two PPP Loans totaling about $1.7 million came from a California bank. The first loan, in 2020, was for $853,800 to pay its 41 employees, and the government paid the bank.

But the second one, in 2021, for $853,813, to pay 39 employees, apparently caught the attention of a watchdog or two, and it looks like, to me, the government is hesitating to pay it off, more than a year later. A look at the website that tracks these loans shows the second loan is listed as “ongoing,” which means the bank has not been reimbursed by either the government or the company. Here’s what the website says:

“Meridian Energy Group Inc in Irvine, Calif., received a Paycheck Protection Loan of $853,813 through Sunwest Bank, which was approved in January 2021.

This loan has been disbursed by the lender and has not yet been fully repaid or forgiven. The exact status of ongoing loans is not released by the SBA.

“The size of company’s PPP loan indicates that the number of employees on payroll during the eligibility calculation period (typically 2019) was higher than the 39 jobs reported as retained on the PPP application. The minimum number of employees this company must have had in 2019 to qualify for the loan range received is 41. This estimation is accurate if all employees were paid at or over the $100k PPP salary eligibility cap.”

There’s no way of telling for sure what all of that means without talking to the bank or the company, neither of which is eager to take my phone calls. But what it looks like is that Meridian might be on the hook for another $850,000. Along with the $600,000 it owes its former employees, who probably should have been paid with the PPP money but weren’t; the $420,000 it owes the engineering firm GATE, which has taken it to court; and the $2.2 million lien against the land it plans to build on for site preparation, also which it never paid for. 

I’ve got a friend who’s an investment banker who has taken a casual interest in this story. He sent me an e-mail this week with his take on what is going on. Here’s part of what he said:

“The second (Meridian) loan is still listed as being “not forgiven” or it is  an active loan.  I can’t tell whether they are current on their P&I payments or not.  Either way, amortization starts 16 months after the loan was made (1/20/21), and is payable over five years.  Not accounting for interest, those payments are $18,477 per month, and started in July 2022 (16 months of deferral) and continue until January 2026.  Since they aren’t selling any new stock that we know of, I’m guessing they’re pretty close to defaulting on that loan (after all they have 39 employees being paid an AVERAGE salary of $105 million per year).

“Overall, the whole thing smells really fishy. (Being a Navy man you know what that is.) We’re pretty sure they have had at least 41 employees over the course of their history, so they would have W2 info in their files.  Lots of VP’s and salesmen have come and gone.  But at the time these loans were made, there was no way in hell that they had 41 or 39 active W2 employees.  No … Way.

“The SBA is auditing ALL loans that were made that were over $2MM, and only selectively “if flagged” for loans less than that.  The Office of Inspector General isn’t uncovering these suspicious loans on their own.  They are looking for tips from people that suspect fraud.  The new congressional law funding 87,000 new IRS agents isn’t particularly popular (or likely to be monetarily fruitful) if they spend all their time going after low income earners.  But it WILL be popular (and probably fruitful)  if they spend time going after fraud.  (Who is in favor of fraud after all?)”

Well, that’s pretty interesting. The fact that more than a year has gone by and the government hasn’t repaid the bank for the loan is indeed suspicious. I looked at the list of similar sized loans, and I looked at the list of North Dakota loans, trying to find another one that has not been repaid. Obviously, I couldn’t look at EVERY loan, but as I spot-checked, I could not find even one loan that has not been repaid. Only Meridian. That tells me that something’s up there. I guess the question the government’s investigators are asking is this: Did Meridian really have 39 (or 41) employees making an average of $100,000 or more in 2019?  We’ll see.

Loan #2319718308. Not Closed

A Home In The Country

Have you ever thought about buying a nice house and a little acreage and retiring to western North Dakota? There’s a friendly young Realtor in Bismarck who has a deal for you. For just a little under a million dollars, she’ll sell you a house on a pretty good gravel road, just a quarter mile from the pavement and just three miles from Theodore Roosevelt National Park, and she’ll throw in about 85 acres of good pasture land with a nice creek running through it.

And you probably won’t have to worry about running out of gas out there in the country on a cold winter day because one of these years you might just be able to walk across the road to a brand-new oil refinery and fill your gas can.

Or not.

The place is owned by a nice elderly couple from Belfield who I’ll call Mr. and Mrs. H. According to documents in the Billings County Recorder’s office, just a few miles down the road, back in March 2016, more than six years ago now, the H’s signed some documents of agreement with a company called Meridian Energy Group granting Meridian a one-year option to buy their rural farmstead and their 85 acres of land. The agreement gave Meridian a year to complete the deal.

But the deal never happened, and a year later, the H’s signed an amendment to the agreement giving Meridian another 180 days to complete the deal. That was March 2017. Those 180 days went by and in September 2017, they signed a Second Amendment giving Meridian another 180 days. The Third Amendment was signed in March 2018. The Fourth Amendment was signed in September 2018. The Fifth Amendment was signed in March of 2019.

Somewhere in there, I think, the H’s got skeptical and talked Meridian into a good faith check for $25,000. But the documents in the Billings County Courthouse end there, and now, three years later, the H’s have determined that Meridian is probably never going to buy their land — heck, the company hasn’t even bought the land for the refinery across the road yet — and they’ve listed it with the nice young Realtor in Bismarck to see if they can sell it to someone else to get some retirement money out of the place.

The H’s are pretty sure that Meridian is going to build a “clean refinery” that will present no health problems one of these days. So’s the Realtor, who told me this just might be a good investment because with a refinery nearby, the land’s going to get more valuable. Uh huh.

As I write this, the property is still for sale. Take a look.

Listing ID22-776. Not Closed.

And that’s my update from the Bad Lands for this week. I hope to have some news on the proposed new bridge over the Little Missouri State Scenic River pretty soon. Some good news.