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AES deal may also be a done deal, judge warns More evidence needed by foes, judge says

LOCKPORT It may be all over but the ruling in the AES Corp. tax break case, and State Supreme Court Justice Richard C. Kloch Sr. had a succinct message Thursday for attorneys trying to prove the deal was fraudulent.

Unless they have more evidence they haven't introduced yet, "You lose, because it's a high standard," Kloch told lawyers hired by Niagara County to challenge the tax break.

The county, the Town of Somerset and the Barker Central School District sued AES and the county Industrial Development Agency over the IDA's decision to grant a 12-year tax break, worth $43.4 million at current tax rates, to AES, owner of a power plant in Somerset and the county's largest property taxpayer.

Kloch gave the county's attorneys, Paul Morrison-Taylor and Craig A. Leslie, a week to come up with written legal arguments that would persuade him to take more testimony on the fraud issue.

That testimony is tentatively scheduled for Aug. 1, but Richard Sullivan, the IDA's attorney, said he doesn't think there will be any court action that day, because he thinks Kloch will have dismissed the lawsuits by then.

"Judge Kloch was right on the law," Sullivan said. But he cautioned, "Nothing is in the bag yet."

Besides the county's fraud claim, all three plaintiffs are asserting that the IDA violated its own policies in the manner in which the tax break was approved last Oct. 27.

Kloch has also said he wants an explanation of how the revenue from the payment-in-lieu-of-taxes, or PILOT, arrangement will be divided up among the three taxing jurisdictions, and whether the PILOT would apply to new construction at the plant. Written arguments on the procedural and allocation questions are due by July 6.

The judge warned earlier this week that he won't approve anything he can't understand.

But when it comes to fraud, Kloch said there are five elements in its legal definition that must be proven with "clear and convincing evidence." He said he thinks the attorneys for the county had only proven one of the five.

Kloch said he believes that AES told IDA Chairman Henry M. Sloma that the company wouldn't bid on a state contract to build a $1 billion "clean coal" power plant in Somerset unless they received a PILOT on the company's existing plant there.

The county's suit asserts that AES intended to bid on the contract whether it received a PILOT or not, and that it was a fraud for the company to say its policy was "no PILOT, no bid."

But of a half-dozen IDA board members who trooped to the witness stand Thursday, two, Angelo Massaro and Gerald Zell, said they didn't even know AES had made a "no PILOT, no bid" claim. The other four, who acknowledged knowing that, said it wasn't the only factor in their decisions on how to vote.

"If you're not going to provide any more proof," Kloch told Leslie and Morrison-Taylor, "it's impossible for you to establish the IDA justifiably relied on that representation."

"I don't think we're required to show that was the only element in their decision-making," Morrison-Taylor argued. "It's somewhat incredible for [Massaro and Zell] to say they didn't understand that was the position."

"I never heard a position from AES at any time, 'No PILOT, no bid,' " said Massaro, attorney for the Niagara Falls School District.

Zell, business manager for Local 237, International Brotherhood of Electrical Workers, said he thought the company's position pertained to a threatened refusal to improve AES' existing plant, not a refusal to seek to build a new one.

Lockport Mayor Michael W. Tucker, accountant Steven H. Brown, Fiddler Roofing company President John J. Petrozzi II and Deanna Brennen of Niagara County Community College's Small Business Development Center all said they knew the score on AES' clean coal position. They said they considered the tax impact and other factors in deciding how to vote. Tucker missed the decisive meeting but said he would have voted "yes."

Sullivan said, "These are good and decent people and they are smart people. . . . They're not likely to be duped."


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