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Judge removes Trustee in surprise move

Billings Gazette

Matthew Brown, AP

The trustee overseeing a bankrupt Montana power cooperative was removed by a federal judge Tuesday in an unexpected move that could lead to the breakup of the troubled co-op and the sale of assets including a power plant near Great Falls.

U.S. Bankruptcy Judge Ralph Kirscher had said in a Nov. 13 hearing that he was reluctant to remove trustee Lee Freeman, given that his reorganization plan for the Southern Montana Electric Generation and Transmission Cooperative was still pending.

But Kirscher said that with the members now in agreement to liquidate the plant and other assets, Freeman is no longer needed. The judge also noted that the trustee has submitted claims for more than $6 million in fees and expenses for his attorneys and consultants and those of lenders for Southern Montana's seldom-used Highwood power plant near Great Falls, Prudential Insurance and Modern Woodmen of America.

Freeman wanted to keep together Southern Montana's four member co-ops, which collectively represent more than 10,000 businesses and households. By raising electricity rates for those customers, Freeman planned to pay off the bulk of an $85 million loan for the Highwood plant.

"Yet, after two years, the trustee has not secured confirmation of a plan," Kirscher wrote. "There is the appearance of a perverse incentive to keep this case going along under the status quo, so the trustee, his counsel, and counsel for the (lenders) can continue filing interim fee applications."

The trustee's removal leaves the members' liquidation plan as the only one on the table. However, Kirscher has said the lenders could step in and offer their own plan in Freeman's absence.

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