Govt revives talks with MRC

The government yesterday revived negotiations with Marine Revitalization Corp. to resolve the Commonwealth’s outstanding liability of approximately $5.7 million, with interests now reaching over $200,000.

Interests on the $5.46-million judgment earlier issued by the Superior Court against the CNMI government and the Department of Lands and Natural Resources continue to balloon due to the government’s inability the to pay the amount.

Recently, the court allowed MRC to seize from the government the remaining $20,000 from the $100,000 that had been appropriated earlier by the Legislature for 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.

MRC attorney Michael Dotts had asked the court to enforce its judgment, saying earlier that the administration’s failure to seek funding from the Legislature was tantamount to disrespect to the court.

Lt. Gov. Diego T. Benavente and the Attorney General’s Office met with the MRC attorney yesterday, as the cash-strapped government attempts to prevent it from sinking into debt over accumulating interests that now average approximately $40,000 monthly.

“I thought we had negotiated a fair settlement for the Commonwealth the first time, but the Legislature never approved it. Now that there is a judgment, we are trying to determine a way to resolve the debt in the best interest of the Commonwealth before it gets any larger,” Benavente said in a media release early last night.

Benavente and the AGO reached an agreement with the MRC to settle the dispute, but the Legislature failed to approve it. Under the terms of that settlement, the Commonwealth would have paid $800,000 within 30 days of approval of the agreement and $2.2 million over 20 years.

“Despite the efforts of the administration, the 14th Legislature failed to approve the agreement. As a result, the parties proceeded to the arbitration that resulted in the judgment,” Benavente’s media release stated.

The court had awarded MRC over $5.46 million several months ago, affirming an out-of-court arbitration order that ended the dispute between the non-profit company and the DLNR over the former’s construction of the Outer Cove marina.

Businessman Anthony 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.

MRC’s position resulted in Pellegrino’s difficulty to pay off loans that were incurred in constructing the marina project, prompting it to seek rescission of the lease agreement.

After its suspension in 2002, arbitration proceeding resumed last Nov. 30. The arbitrators found the government breaching the intent of its partnership with MRC in connection with the marina construction project.

The arbitration order based the award to MRC by ascertaining the cost of constructing the marina, including interests on loans obtained by Pellegrino, which were audited by the CNMI public auditor.

The award totaled exactly $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.