A judge approved giving nearly $2 million to Greenwood from the sale of a failed pharmaceutical company’s building and other assets, but the city may not get all of that money.
About $500,000 will go back to the redevelopment commission and any other money the city gets must be used to pay off loans for the Elona Biotechnologies land and building. Former Elona employees may also need to be paid, if that’s what a judge decides.
Greenwood had loaned or given Elona Biotechnologies about $8.5 million to build a new facility in the city and get federal approval to manufacture and sell a generic version of insulin worldwide. The company ran out of money last year and closed after constructing the building and buying equipment but never getting approval to sell the insulin.
To recoup some of its losses, the city pushed for selling the defunct company’s assets at auction. The Elona building, generic insulin patents and equipment were auctioned for $2.17 million in September. A Johnson County judge recently awarded the city
$1.725 million of the money.
About $100,000 will go to pay a receiver appointed by a judge last year to control Elona’s property. A receiver is a specialist in determining if businesses can continue functioning or whether the property and assets should be sold.
The court also set aside $250,000, which could be given to former employees of the failed company who sued for back pay.
But Greenwood will get that money if the former Elona workers don’t get paid.
The receiver, Bernadette Barron of Barron Business Consulting, was hired at a pay rate of $375 per hour and will have earned nearly $100,000 for investigating whether the business could be salvaged and then dissolving the company and selling all it owned. The receiver’s work took about as long as planned, and Barron should file her final report on the case this week, city attorney Krista Taggart said.
The city had expected the case, as well as the receivership, to wrap up by the end of 2013. Any additional time required shouldn’t cost the city much, Taggart said.
Five former Elona workers have requested a total of $127,496 out of the auction proceeds, and the court has set aside $250,000 to more than cover any money they could be awarded.
A judge should decide this year whether the city or the workers will get the money, according to attorney Sam Hodson, who represents Greenwood.
The city doesn’t think the former employees have any claim to back pay because, by state law, contract employees don’t qualify for it, he said. Based on what former Elona owners Ron and Donna Zimmerman have said, the company only hired independent contractors during the final year it was in business, he said.
The city doesn’t think the workers have a good case and doesn’t expect to settle with them out of court unless it would cost less than continuing the court case, Taggart said.
If the workers aren’t awarded any money, then the city’s net loss on its investment in Elona will total at least $9.6 million, including the initial loans and cash incentives given to the company, attorneys’ fees and other costs, such as paying to maintain the Elona property. Heartland Bank, which also loaned Elona money, got $425,000 of the auction proceeds.