U.S. Steel played shell games with Canadian plants, says past Stelco president
Bob Milbourne says USSC was a 'corporate shell' created by USS in legal filings
Bankruptcy court filings show a past president of Stelco says U.S. Steel never gave the Canadian plant a chance and is playing shell games to recover its acquisition costs ahead of topping up pensions.
Objecting to U.S. Steel's (USS) claim the Canadian operation owes its parent company $2.2 billion, former Stelco president Bob Milbourne, as well as the United Steel Workers, the provincial government and a group of pensioners, filed their latest objections Thursday and Friday.
USS has transferred assets to USSC, a corporate shell devoid of any financial or managerial capacity which USS established to hold certain assets and liabilities it acquired with Stelco- Bob Milbourne, past president of Stelco
They opposed a motion that would put USS at the front of the line for creditor payments over other stakeholders, such as the pensioners.
Stelco was purchased in 2007 by U.S. Steel. Shortly after it was purchased, the Hamilton plant was idled, and fixed operating costs began to erode any chance of profit. The Canadian operation declared bankruptcy last September.
Milbourne's original filing in April painted a scathing picture of USS's treatment of the former Stelco, of which he was president between 1991 and 1996.
He said U.S. Steel Canada (USSC) had not treated the Canadian plants in Hamilton and Nanticoke as separate entities or arms-length organizations during August and December of 2007, a time immediately after the purchase of Stelco by USS he called the "maternal time." He suggests USS crippled USSC future earnings during this time.
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By filling USSC orders for steel from other USS plants and leaving USSC as merely a finishing plant, the productivity of the operation was stymied, the former Stelco boss added.
USSC a 'corporate shell'
In legal filings from Apri, Milbourne said the process will "under-absorb the fixed costs of the entire steel plant and will cause its operating results and cash flows to be dramatically impacted."
He went on to say USSC was just a "corporate shell" created to hide assets and liabilities of USS:
"USS has transferred assets to USSC, a corporate shell devoid of any financial or managerial capacity which USS established to hold certain assets and liabilities it acquired with Stelco.
"This approval would also allow USS to recover a material portion of its operating losses... Such recourse would be of unique and singular benefit to the Shareholders of USS, as they would in any other circumstances be 'at the end of the line' after all other obligations of USSC to it's 'legitimate' creditors had been discharged."
In its filing, the Ontario government says USS wants to treat all other claims to recover money from USSC on slower paths than its own, which they described as "unfair." The government, as well as the other three objectors, want USS's claim to be at the front of the line for money in a liquidation event, thrown out.
Lawyers for the Financial Services Commission of Ontario wrote the that by allowing USS to get to the front of the line, it would be "forcing the Employee Stakeholders into years of protracted and expensive litigation."
Last month, bankruptcy protection was extended to the fall for USSC while it attempts to sell the plant, a deadline USSC plans to extend according to court filings.