Independent candidate for governor Eliot Cutler accused Gov. Paul LePage of showing ‘willful ignorance” by supporting Cate Street Capital, a company that was provided tens of millions of dollars in state credit to help save two paper mills but ultimately failed to deliver.

Cutler, at a news conference Tuesday at his Portland office, said LePage showed poor leadership by not properly vetting the New Hampshire-based equity firm, for promising and then delivering public assistance and for personally going to bat for a company with a dubious track record.

“The story of Cate Street Capital, its investors and Maine’s governor is a massive scandal. Corporate welfare and crony capitalism at its worst,” Cutler said. “Before the state of Maine goes the way of Great Northern, we need new management.”

His comments came about a week after Great Northern Paper Co. declared bankruptcy and prepared to liquidate its assets. The company owes $50 million to nearly 1,000 creditors and Cutler said Maine could be on the hook for $15.9 million in payments made to investors who backed Cate Street through the New Market Tax Credit program, a program that was created largely to benefit Cate Street.

The federal New Market Tax Credit program has come under scrutiny by the Government Accountability Office, an independent agency that investigates, evaluates and audits federal agencies and programs. In August, the GAO found that the complex investment deals were “masking rates of return” for investors, in some cases leading to returns well above market rates.

The difference between Maine’s program and a similar federal program is that the credits are refundable.

Cate Street, which owns the Great Northern paper mill in East Millinocket and a former mill in Millinocket that is being demolished, still has not commented publicly since last week’s bankruptcy announcement.

The governor’s economic development commissioner, George Gervais, said the state was still working hard to find new investors for the properties.

As for Cutler’s claims, Gervais called them inaccurate.

“This purely political campaign outburst is getting in the way of any progress,” he said, adding that without Cate Street’s investment, the mill would have closed more than two years ago and more than $40 million in payroll would have been lost.

The mill’s closure put nearly 250 people out of work and could signal the end of papermaking for a region that was once defined by the industry.

U.S. Rep. Mike Michaud, the Democratic candidate for governor who worked for the East Millinocket mill for 29 years, has not been outwardly critical of Cate Street Capital but has said there are lots of unanswered questions. His campaign has said Michaud does not want to politicize the issue or jeopardize any negotiations that might be going on.

Cutler, though, has been critical of Cate Street for months, long before the bankruptcy filing by Great Northern

“The people of Maine have been victimized in a financial shell game because no one – especially the Governor – was asking the hard questions,” he said Tuesday. “Now, we’re left with the question ‘where’s the money?'”

“The state’s pocketbook was opened wide to a company that should never have been permitted to cross the Portsmouth-Kittery Bridge.”

Staff Writer Eric Russell can be contacted at 791-6344 or:

erussell@pressherald.com

Twitter: @PPHEricRussell