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City: Carlyle, Mountain Water officials should appear in court to discuss sale
Carlyle, Mountain Water

City: Carlyle, Mountain Water officials should appear in court to discuss sale

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Robert Dove, center, managing director of the Carlyle Group's Infrastructure Fund, the parent company of Mountain Water Co., listens in Missoula County District Court on Monday as the proceedings to establish value of the water company begin.

In a court document filled with indignation, the city of Missoula is asking a judge to order Robert Dove and John Kappes to appear in court.

Dove is director of infrastructure at The Carlyle Group, and Kappes is the general manager at Mountain Water Co.

Earlier this month, Carlyle sold the water utility to the subsidiary of a Canadian company despite the order from Missoula County District Court saying the city of Missoula has the right to buy it. The buyer – Liberty Utilities of Algonquin Power and Utilities Corp. – and the seller did not wait for approval by the Montana Public Service Commission.

Now, the city wants the Carlyle director and local manager to explain the reason "they deliberately withheld from the Court ... the fact that they and Algonquin/Liberty had already consummated the transfer of ownership of Mountain Water in apparent defiance" of state regulators and the 4th Judicial District Court.

The parties met in court last Monday, one workday after the sale took place, but no one brought up the critical matter to the court, the brief said: "They all sat silent with regard to one of the most important developments in the (condemnation) case since the day it was filed nearly two years ago."

In a brief filed this week, the city of Missoula asks the court to appoint a supervisor who will oversee Mountain Water, arguing the recent actions raise questions about whether Liberty/Algonquin of Canada can be trusted to run the company "for the public good" until the city takes possession.

In an email, though, Kappes, said the city’s motion reflects “continued, unfounded paranoia and deflection on the part of the city.” He also said Mountain Water will continue to run the company responsibly and abide by the asset protections state regulators put in place.

The city is trying to turn attention away from the fact it still doesn’t have a plan to operate the utility, he said, and its legal costs “will impact citizens far more than what they’ve admitted so far.”

“The truth is that when Missoula residents turn on the tap, they know that they can count on safe, clean, affordable water, just as they have for decades,” Kappes said. “This will remain true for as long as Mountain Water is privately owned.”

He said Mountain will address other specifics in its responses to the court.

Despite the assertions by Kappes, the city alleges neither Carlyle nor Algonquin will do right by Missoula water customers given their track records.

"Consider the following," the brief said. "Carlyle executives and the hand-picked officers of its three water companies now will pay themselves millions of dollars in bonuses for their 'stewardship' over the last couple of years even as they sprint for the exits, with little thought to making sure that the people of Missoula have their interests protected ..."

Kappes was among the shareholders slated to receive a bonus, but he has said he intends to remain general manager of Mountain Water. The city’s brief notes the CEO of one of Moutain's sister companies in California left his position "immediately" following the sale.

Now, the local water utility purportedly rests in the hands of foreign operators who disregard Montana regulations, the city said.

"The only reasonable inference from Algonquin/Liberty's glaring disregard of the Montana legal system is that they plan to pillage Mountain Water assets, including cash assets, with intent to defraud the city," read the brief. "Thus, injunctive relief is appropriate."

As such, the city is asking the court to appoint a special master to oversee day-to-day operations at the water company.

Kappes said conditions placed on the system by the Montana Public Service Commission – ones agreed to by Liberty – guarantee the utility’s assets “will not be sold or otherwise removed from Missoula.

“We will continue to fully abide by those ring fencing requirements, just as we have in the past. Nothing has changed,” Kappes said.

Spokespeople from Carlyle and Liberty did not comment Wednesday on the city's request or allegations.

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