Geneva Steel Creditors Committee Member Resigns Over Leak

Geneva Steel Creditors Committee Member Resigns Over Leak

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SALT LAKE CITY (AP) -- A member of the committee of Geneva Steel's unsecured creditors has resigned after a special examiner appointed by the U.S. Bankruptcy Court recommended he be fired for leaking confidential information to the company.

Jon Cartwright of Cartwright Enterprises stepped down following allegations that he leaked sensitive information about the committee's negotiating position to Geneva's management.

The leaked information included an analysis of parts of Geneva's proposed Chapter 11 plan by Thomas Beckett, an attorney for the unsecured creditors, and negotiating strategies he recommended to them.

The leak was exposed when Beckett was mistakenly faxed a copy of his own memorandum on Feb. 16 by Geneva. The fax had been intended to go to Geneva's attorney, Stephen Garcia.

Joel T. Marker, the special examiner, identified the source of the leak as Cartwright.

Cartwright allegedly provided the secret information to Paul Peterson, a Geneva employee in charge of equipment sales who served previously as the steel mill's purchasing director. Peterson passed them on to Ken Johnsen, Geneva's president and chief executive.

Marker contended that Johnsen and Garcia violated rules of professional attorney conduct when they failed to disclose that they were given privileged attorney-client information.

Johnsen and Garcia told Marker they already were fully aware of the unsecured creditors committee's position and did not learn anything different from Beckett's documents.

"I received the information and I did read it, but I don't believe there were any ethical violations involved," Johnsen said. He was quoted by The Salt Lake Tribune in Friday's edition.

Earlier, he told the Daily Herald, "We have some disagreements on some specific items in the examiner's report that need to be worked out. What we did was within ethical boundaries. We're hopeful the whole thing can be resolved amicably."

The unsecured creditors are among several entities vying with Geneva for coveted rights to manage a proposed mixed-use residential, commercial, retail and light manufacturing development on the 1,750 acres of the former steel plant in Vineyard.

For Anderson Geneva LLC, one of the parties seeking development rights to the Geneva property, this "ethical conduct breach makes it difficult to negotiate on a level playing field," said Michael Hutchings, an attorney for Anderson.

"Geneva got information it shouldn't have received. That puts Anderson at a slight disadvantage," he said. "We're now evaluating whether to file requests for any type of relief."

Cartwright, who resigned from the committee Wednesday, could not be reached by the Tribune for comment. But Marker's report quoted him as saying he could not recall if he had sent the information, and that he wanted to consult his lawyers before talking further to Marker.

(Copyright 2005 by The Associated Press. All Rights Reserved.)

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