MRC allowed to seize $20K from NMI government

The Superior Court yesterday allowed Marine Revitalization Corp. to seize some $20,000 from the CNMI government and set aside the income being generated by the Department of Land and Natural Resources’ assets and operations to satisfy part of the $5.46 million court judgment against the government in favor of the marina builder.

This came about as the government has yet to satisfy the court judgment and the Legislature has yet to pass appropriation for this purpose.

The court had awarded MRC over $5.46 million several months ago, affirming an out-of-court arbitration order that ended the legal dispute between the non-profit company and the DLNR over the former’s construction of the Outer Cove Marina. But the Babauta administration earlier disclosed that it has no money to pay for the award.

MRC attorney Michael Dotts said yesterday that DLNR has not been paying his client despite the court’s order. He said interest has been accruing and has already reached over $100,000 on top of the $5.46 million judgment.

Despite the standing court order, Dotts said the CNMI government has not asked the Legislature to appropriate funds to satisfy the court judgment, which he described as disrespect for the court.

Dotts said the court allowed MRC to seize the remaining $20,000 from the $100,000 that had been appropriated earlier by the Legislature regarding the dispute’s settlement. Since the amount would not suffice to satisfy the entire multi-million-dollar award, the court allowed MRC to include the income generated from DLNR’s operations and assets.

Dotts clarified, though, that the income would not be seized right away, but would simply serve as security while the government requests the Legislature for funding to pay MRC. For instance, the DLNR operates the Smiling Cove Marina, which generates income by renting out berthing spaces.

DLNR Secretary Richard Seman and acting Finance Secretary Robert Schrack appeared yesterday in court after being subpoenaed in connection with the MRC case.

The court’s subpoena on Seman compelled the DLNR secretary to produce the proposed budget for his department for the fiscal year 2005, while Schrack was required to produce the proposed CNMI government budget for the same fiscal year. The subpoenas also compelled the two Cabinet members to appear in court yesterday and provide testimony.

After the arbitration proceeding late last year, Lt. Gov. Diego T. Benavente said that the government has no money to pay MRC over $5.46 million unless the Legislature identifies budgetary resources and earmarks them for payment.

According to Benavente, the absence of an appropriation for the payment might sink the government further into debt if it fails to pay the award due to interests. He chided the Legislature for not acting on the administration’s proposed $2.2 million settlement for MRC some two years ago, which could have saved the government substantial money instead of proceeding with arbitration.

In the lawsuit, MRC and its founder, businessman Anthony Pellegrino, asked the court to confirm the arbitration award, impleading the DLNR as defendant.

The award totaled $5,468,818. The amounts are payable to Pellegrino, $3,377,513; Saipan Ice & Water, $1,083,400; Show Boat, Inc., $$3,877; Saipan Sea Ventures, $508,483; Pelly Boat Charter, $40,016; Pelly Enterprise, $46110; and Mobil Oil, $409,408.

The order also awarded attorney’s fees and expenses in the amount of $255,879.89 to the law firm of O’Connor Berman Dotts & Banes. It also set fees and expenses to arbitration officers Edward Manibusan, David Mair, and Robert A. Hefner in the amounts of $3,049, $2,250, and $11,992.10, respectively.

Pellegrino established MRC to build the Outer Cove Marina in the mid-‘90s, with the end objective of turning it over to the government. Arbitrators concluded that the marina project was a viable venture at that time because Saipan has limited mooring space at the Smiling Cove.

MRC then proposed the construction of the Outer Cove Marina, leasing submerged land that was memorialized in an agreement dated Aug. 24, 1995. A provision of the agreement bound the DLNR secretary to establish a policy to bar owners of commercial passengers and fishing boats from renting slips at Smiling Cove.

The provision wanted to divert commercial vessels to the Outer Cove Marina to ensure the viability of the project. MRC then proceeded to build the marina, which opened in 1998.

However, a dispute between MRC and the government arose in 2001 after the latter not only failed to bar commercial vessels from renting slip space at Smiling Cove, but also actively solicited commercial lessees.