DLNR again told to pay Pellegrino, MRC

For the third time, the Superior Court has ordered the CNMI government to pay its $5.65 million debt plus interest to businessman Anthony Pellegrino and his Marine Revitalization Corp.

Associate Judge David A. Wiseman, in a decision issued yesterday, warned that the court will not hesitate to promptly address the Department of Lands and Natural Resources’ future noncompliance.

Wiseman described DLNR’s non-compliance with the court’s two previous orders as “bizarre and cavalier.”

“Failing to fulfill their contractual duties and then disregarding the court’s orders that followed can create an environment of distrust and may shape an unsavory reputation for the Commonwealth. A noble reputation takes great effort to build and may be destroyed suddenly,” he said.

The judge incorporated his two prior orders in the case in his third order.

Wiseman directed DLNR to pay on or before April 1, 2009, to MRC’s lawyer the $20,000 that the court previously ordered be paid in May 2005, plus accumulated interest at a rate of 9 percent from May 2005 to the date of payment.

Wiseman said DLNR shall pay all biweekly income it gets from its operations at the Outer Cove Marina, including boat slip rental fees, to cover MRC’s costs in executing the court’s judgment.

He required DLNR to report to the court by April 30, 2009, on what efforts have been made to obtain an appropriation of funds by the Legislature to pay the judgment. Wiseman also ordered DLNR to report on what has been collected out of DLNR’s operation.

Wiseman authorized MRC and Pellegrino and their other businesses to use a portion of the $5.65 million judgment plus interest as a dollar-for-dollar offset against the CNMI Gross Revenue Tax.

In the event the order is not complied with, the judge said that Pellegrino and MRC are authorized to seek an order garnishing federal funds, appropriating portions of DLNR’s budget, and obtaining a contempt order from the court.

Wiseman said it is not his intention, nor Pellegrino’s and MRC’s, to compound an already dire economic situation.

“However, the reputation of the Commonwealth cannot afford the long term consequences of a government which accepts the benefits of a contract, refuses to fulfill their own obligations, and ignores judgments which they have stipulated to,” he stressed.

These actions, Wiseman said, not only create an appearance of impropriety but they develop a precedent and a standards of operations within the CNMI which has far-reaching consequences that will no doubt impede and prevent the attraction of investments in the future development of the Commonwealth.

The judge added that DLNR’s debt to MRC is worsening daily—inevitably increasing the harm not only to MRC but to the entire CNMI.

According to MRC and Pellegrino’s counsel, Michael Dotts, the amount owed as of June 2008 was $7,735,623 and is currently accruing interest at a rate of $43,790 a month.

Pellegrino established MRC to build the Outer Cove Marina in the mid-90’s. The goal was to turn 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.

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

DLNR agreed to a judgment of the court ordering it to pay more than $5 million to MRC or Pellegrino.

The court’s first ruling, entered in May 2005, ordered DLNR to pay $20,000 “forthwith” to MRC, and to pay all income from DLNR operations into the court bi-weekly. DLNR did not comply.

The court’s second ruling, entered in May 2008, again ordered the prompt payment of the $20,000, this time by a date certain, and also allowed MRC to recoup the balance of the judgment through tax credits. DLNR filed no objection and did not even appear at the hearing. The agency still did not pay the $20,000.

In September 2008, DLNR filed a motion to quash and or modify the court’s orders. DLNR did not dispute that there is a judgment against it and that the entire amount is outstanding but claimed that the judgment can only be paid by specific appropriation of the Legislature and no such appropriation has been made.

Wiseman disagreed with the DLNR. He ruled that the separation of powers principles bestows upon the Judiciary the tools to enforce judgments of the court. Wiseman said the court’s ability to do so “cannot be crippled by an uncooperative government defendant.”