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Key Westside Booster figure central in recycling controversy

CORDELE — A failed recycling center’s second chance at life is mired in a multimillion-dollar bankruptcy case and facing a ticking clock as a Macon businessman with a spotty track record promises to make a green business work in rural Crisp County.

Already, the Crisp County Recycling Center has been the scene of one of the largest public bond defaults in state history. A second attempt, largely orchestrated by Macon’s Phil Davis, has led to multiple court actions, a string of environmental violations in several midstate locations and a lot of crossed fingers that it can all work out in the end.

The concept was a recycler’s dream: Take plastic soda bottles, including completely full leftovers that Coca-Cola and Pepsi would pay to get rid of, and recycle the plastic. Then use the sugar in the soda to make ethanol.

Davis, the central figure in Bibb County’s Westside stadium fiasco who also pleaded guilty to fraud charges related to a bank deal in North Carolina in 1981, started two companies to make it all happen.

In August 2007, with the recycling venture running and the ethanol component on its way, The Cordele Dispatch newspaper hailed Davis for bringing “new life” to the county’s biggest debacle, a $70 million recycling facility that had been shut down for years.

But now the recycling center is nearly idle again. The ethanol plant Davis and investors built beside it is completely shut down. Creditors are clamoring for the more than $5 million they say one of Davis’ companies, Recycle USA, owes them.

“(We’d hoped) to provide jobs, bring a new industry to Cordele, generate money for the bond people to collect their money,” said Gladys Bishop, executive director for the local solid waste authority that issued bonds more than 10 years ago to build this facility.

“We hoped it would be an asset to the community,” Bishop said. “And unfortunately, it has not turned out to be that.”

Now the authority can do little more than wait for lawyers and a federal judge to sort things out. Though it technically owns the facility, none of the authority members have a key to it, Bishop said. It’s leased to Davis, but he hasn’t paid the rent in months. Everything is held up by the bankruptcy case.

Davis, who said he is a plastics broker and recycler by trade, believes he can emerge from all this and realize the idea this facility represents: a high-tech marvel of green engineering, providing jobs in a community of rolling fields.

He says he plans to have some operations back up as soon as next week. He says he’s “95 percent sure” investors will inject serious new capital into the project in the next two months. And he says he will pay off his creditors, buy the facility from the authority for more than $7 million and hire up to 150 people.

But Davis has made promises before.

IN THE THICK OF CONTROVERSY BEFORE

In May 2001, a little more than a year after the Crisp County Recycling Center had proved itself a failure the first time, Davis was embroiled in his own controversial public venture.

He had chaired the Westside Boosters group, which wanted to raise private money to build a football stadium at Westside High School in Bibb County. County commissioners got involved, and the stadium concept became an entire complex with multiple fields.

Davis and his boosters supposedly had pledges from community members and groups to help finance the project, and the Bibb County Commission agreed to guarantee a $3.65 million loan.

The complex was built and is used today by Bibb County high school teams. But the boosters defaulted on the loan, and the taxpayers were on the hook for $3.2 million.

For nearly a year, Davis refused to identify the purported donors, relenting only after the county threatened a lawsuit. When The Telegraph checked the list of 20 pledges, 11 of them either said they never made a pledge or that their promises were misrepresented. Six others either couldn’t be reached or refused to answer questions.

A local grand jury investigation got under way and lasted about four months.

Davis believes he was exonerated by the grand jury’s final report, and no criminal charges were ever filed. The grand jury’s presentment focused on the public officials who put the county taxpayers on the line, not Davis.

But as The Telegraph tried to piece everything together, Davis was evasive. Reporters asked Davis if he’d ever been arrested or indicted. He said a stroke in the early 1990s left him unable to remember. Eventually the paper discovered he’d been indicted in North Carolina in 1981 and pleaded guilty to 10 felony counts of filing false documents to defraud a bank.

Now he’s asking the dozens of entities involved in the Crisp County Recycling Center, some of whom have sued him and Recycle USA outside of the federal bankruptcy case, to trust him. He says he has new investors lined up, though he won’t name them. He has until Sept. 30 to pull all the money together under the latest court agreement in Recycle USA’s bankruptcy case.

He has already missed deadlines to purchase the facility, according to the authority, and if he misses this one, the creditors will be able to look for other buyers. Davis’ exclusive purchase option on the facility, now protected by Recycle USA’s bankruptcy filing, will be gone.

But the effort, he insists, is “not on the rocks.”

“The bankruptcy was (filed only) to get the stay,” Davis said in a recent meeting with The Telegraph and one of his attorneys. “There’s a lot of good here.”

AUTHORITY CHAIRMAN: WE DIDN’T KNOW ABOUT WESTSIDE SAGA

Authority Chairman Kirby Wood, in a statement written by the authority’s attorney, Ed Sell III of Macon, said authority members didn’t know about Davis’ role in the Westside case when they signed on with him.

They did, however, know about the 1981 indictment, Wood said in the statement.

In many ways, the authority was desperate. Their plans, hatched in the late 1990s, to accept unmixed trash from nearly 40 area governments, truck it to the center, sort it, and recycle 80 percent of it were a dismal failure.

Nearly from the start, most of the trash went straight into a landfill.

Rounds of layoffs cleared out the plant, which had employed some 200 people at its peak and operated at a massive loss until it was shut down in 2001.

Plus, the authority really didn’t have much say. Though technically the authority remains the facility’s owner, an international bond insurer is really calling the shots. Financial Security Insurance had insured the initial bonds used to build the facility. When the project went belly up, it was FSA, not local taxpayers, left to make the bond payments.

“Everything that happens goes through them,” Sell said of FSA.

A company spokeswoman said FSA would not comment for this article, other than to say it continues to make payments as required.

Facing a need to salvage something at the idle plant, FSA led the authority into a lease-purchase arrangement with Davis, who had a recycling facility on Riggins Mill Road in Bibb County.

Davis, through Recycle USA, started renting the Crisp facility in 2005, with plans to upgrade and eventually buy it. Along the way, he and his partners added the ethanol factory to take advantage of the sugar-rich leftovers from his recycling process: gallons and gallons of soft drinks.

They created a second company, US Ethanol, and invested millions at the facility. Bishop, the authority director, said Davis and his partners spent $3.5 million in the past year and a half on new equipment. Davis puts total upgrades at $10 million.

“If we end up with it back, it’ll certainly be more valuable than it was in the beginning,” Bishop said.

Two of Davis’ former employees, one of whom now works for The Telegraph, dispute that. Joe and Monte Kellam, who are brothers, have pushed local authorities to investigate Davis and Recycle USA. In a letter to Crisp County Sheriff Donnie Haralson, Joe Kellam asks the sheriff to follow up on an allegation that Davis sold equipment from the facility without permission from the authority.

“(Davis has) pretty much stripped that place,” said Monte Kellam, a former accountant for one of Davis’ companies who now works at The Telegraph. “He’s scavenged it.”

Davis, in turn, accuses the Kellams of lying and conspiring to doom his business. Joe Kellam, who was once the ethanol plant’s general manager, was fired for “gross mismanagement” in January 2008, Davis said. Joe Kellam confirmed he was fired but said it was because Davis found out he was pushing for a criminal investigation.

“He told me I needed to keep my nose out of something that wasn’t my business,” Joe Kellam said.

LABOR DEPARTMENT INVESTIGATING

It’s hard to say what has and hasn’t happened in the facility. Davis wouldn’t let The Telegraph inside, and Bishop said no one on the authority actually has a key. Davis said the last time an authority member was inside any of the buildings was April 2008.

But the authority apparently has no problem with the way Davis has handled the facility’s equipment, and he says he had FSA’s permission to sell non-working equipment for scrap.

The Kellams, who brought this story to The Telegraph, haven’t been able to spark a local investigation. Haralson told The Telegraph he didn’t remember getting Joe Kellam’s registered letter until The Telegraph faxed him a copy of it last month. Haralson said he never followed up on the letter because no one with an actual ownership claim ever complained.

“There’s nothing for me to follow up on,” he said. “I wouldn’t know where to begin. It’s just a mess.”

Joe Kellam also said he met with local District Attorney Denise Fachini, who told The Telegraph the meeting never took place, then stopped returning the newspaper’s phone messages.

There is, however, an ongoing Georgia Department of Labor investigation into whether Recycle USA violated state employment rules, according to a department spokesman, who wouldn’t elaborate.

“We take all allegations of fraud seriously, and that’s really all I can say right now,” spokesman Sam Hall said.

If FSA, which the authority defers to, has a problem with Davis selling equipment, it’s not saying. The company and Davis’ creditors are using the courts to get what they want, and there are multiple filings against Recycle USA in federal bankruptcy court, as well as State Court in Bibb County. One creditor, Graham Packaging, has tried to garnish Davis’ earnings by filing in State Court and serving numerous area banks with papers.

The authority and other creditors accuse him of owing hundreds of thousands of dollars in rent for the facility, neglecting to pay bills, racking up millions in debt then filing bankruptcy for his company “for the sole purpose” of holding onto the facility while he tries to raise money to buy it.

“Debtor has no realistic hope of reorganization,” a bankruptcy case filing from the authority states.

Davis blames the economy. The bottom dropped out of the recycling market about the time he got his operation up and going. Even the ethanol market, once the centerpiece of Georgia’s emerging fuels economy, has seen a dramatic drop-off in the price of fuel.

Other difficulties, including a major error by the authority itself, delayed Davis’ outright purchase of the facility, he said. That deal was supposed to close in October 2007, he said. By the time the problem was cleared up, it was April 2008.

“Our banks had said ‘bye-bye,’ ” Davis said.

EPD LEVIES THOUSANDS OF DOLLARS IN FINES

Before Davis could close on the facility, the project needed a closure certificate from the Georgia EPD.

Because the authority had operated the center for a while in the late 1990s and early 2000s, running mountains of trash through it, the facility had to be cleaned to get that certificate.

The authority realized this, Davis said, eight days before a sale was to close.

Eric Anderson, an Atlanta attorney representing FSA in the bankruptcy case, called that one of Davis’ “excuses.” Sell said Davis was buying the facility “as is” and that “it was his problem” to deal with the EPD issue.

At any rate, the situation is only one of the several brushes with the Georgia EPD for Recycle USA and the facility itself.

The recycling center apparently never had a septic system for its bathrooms, despite being operated by the authority for about two years. Davis said he didn’t know this when he signed a lease.

“No one in the world could have gotten away with that except a government,” Davis said.

Because of that, Recycle USA was discharging raw sewage from the bathrooms into nearby ponds in the spring and summer of 2007, according to a consent order filed by the EPD. They were also discharging the leftover water from rinsing out soda bottles, the order states.

The division fined the company more than $20,000 and ordered several changes, including installation of an on-site septic system for the bathrooms, said Mary Sheffield in the EPD’s Albany office. Some of that work has been done, some has not. Much of the area’s soil isn’t suitable for a septic system, and the bankruptcy has delayed the process as well, she said.

But before the plant shut down, the company needed somewhere else to take its wastewater.

Recycle USA and U.S. Ethanol trucked wastewater to the city of Ashburn’s water treatment system for about a year “without any noticeable adverse effects,” said Ricky Cornelius, who used to work at the city’s plant but now works for the city of Tifton. Eventually the wastewater did cause problems, and the city stopped taking shipments.

“When I said they couldn’t bring it, they didn’t try to sneak it by or anything,” Cornelius said. “I found nothing wrong with them.”

Trucks also carried wastewater to Rochelle, where Jeffrey Robertson handled water testing at the treatment pond.

“They were dumping as much as five to six tractor trailer loads a day into the pond,” said Robertson, who now works in Eastman. “It was definitely more than they had originally stated that they were going to dump into the pond.”

This “overloaded the pond,” killed fish and “created a terrible mess,” Robertson said. The problems led to an EPD consent order against the city of Rochelle, which was fined $5,000. The EPD told the city not to accept any more loads from Recycle USA, former Mayor Ralph Sutton said.

Some water went to a Bleckley County hog lagoon, but the EPD shut that down as well. For at least a little while, trucks were brought from Crisp County to Bibb County to dump at Riggins Mill Recycle Plastic, a plant Davis operated in east Bibb County but shuttered in November 2008.

The Macon Water Authority eventually made Davis pour concrete into the pipes there to keep unauthorized waste loads from entering the authority’s system, authority compliance manager Mark Wyzalek said.

Wyzalek said he was told tanker trucks were hauling wastewater to the Riggins Mill Road site at night to dump wastewater. He said he approached Davis about reports of dumping in 2007 and Davis told him “he would never do something like that.”

But in July 2008 another episode was reported, and Riggins Mill Recycle Plastic manager Tony Heath confirmed it, Wyzalek said. Davis told The Telegraph recently that there was no dumping at Riggins Mill in 2007, only 2008. He said the wastewater was dumped into a 400,000 gallon tank at the plant and that the concrete was meant to keep the water from leaving that tank and entering MWA’s system.

Though Davis complied with an order to seal off the pipes, the Riggins Mill company’s water service eventually was cut off for non-payment.

That happened this past April, Wyzalek said, and Riggins Mill Recycle Plastic owes the authority some $7,000, he said.

Davis disputes that amount but said it will be addressed in the bankruptcy case. Recycle USA has nearly $6 million in claims against it, said James Frenzel, an attorney for many of Davis’ creditors.

About $578,000 is owed to the Solid Waste Management Authority, the authority says in bankruptcy records. Davis disputes the amount as well.

Other debts are spread out among a series of construction workers, technical companies, utilities and suppliers. The largest is Campbell Technological Resources, an equipment company in Ohio that says it’s owed more than $3.5 million. Campbell Technological has sued Recycle USA and Davis individually in State Court, as well as being part of the federal bankruptcy case. The company lists its attorneys’ fees alone at more than $460,000.

And he promises that, eventually, this will all turn out for the best and that soon he will have enough money from investors to pay off his company’s debts and restart the plant.

“I’ve gone day-to-day and that’s it,” Davis said. “I’ve lived my life and things happened. ... We did the right thing in Cordele.”

Information from The Telegraph’s archives was used in this report. To contact writer Travis Fain, call 744-4213.

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