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Polish government sues Boston investor over failed margarine factory

An investment in Polish margarine that went sour could cost a Boston venture capital firm and its principal owner more than $3 million in arbitration costs, if a federal judge here agrees to enforce an international tribunal's decision against them.

The Polish government this week filed a lawsuit in US District Court in Boston against Vincent Ryan and his Schooner Capital over the costs it was awarded in 2015 by an international tribunal, following more than 20 years of legal wrangling between Poland and Ryan over the fate of a margarine and vegetable-oil factory Schooner took over in 1994 following the collapse of communism in that country.

The tribunal, which met in Paris, said Schooner and Ryan had failed to make their case that Poland owed them more than $18 million in damages for the bankruptcy of Kama Foods by what they charged were interminable demands for back taxes based on the fees a separate company Schooner set up charged Kama for management consulting.

According to the arbitration decision and a Polish press account, Ryan had set up that company to make investments in post-communism Poland. In 1994, Ryan's company paid the Polish government nearly $19 million for a controlling interest in Nadodrzanskie Zaklady Przemyslu Tlusczowe - which it then renamed Kama Foods - in Brzeg, a town on the banks of the Oder River in southwestern Poland that was first settled several thousand years ago.

Ryan's company also promised to invest $38 million to bring Kama up to the state of the art in margarine and edible oil production.

Not long after the new company took over, the government began demanding taxes based on the fees Kama was paying to the company.

Kama ran into financial difficulties as the Polish government pressed its demands for back taxes. In 2000, Kama stopped making social-security payments for its workers. The next year, it stopped paying its workers.

It tried various measures to get back into the black, including selling off its margarine trademark and excess power from a power plant it owned, but the measures all failed and the company declared bankruptcy in 2003.

Ryan and Schooner said the company could have recovered, but that the court battles over the back taxes meant nobody would lend it money and so the company's failure was ultimately the Polish government's fault.

In 2011, Ryan sought to have an international tribunal hear his argument that the Polish government owed him the roughly $18 million he claimed the tax issue had cost him.

After legal wrangling over whether such a tribunal would have any jurisdiction - and even over which city it would hold hearings in - a tribunal of arbiters from Pakistan, Chile and Mexico met in Paris, held hearings and basically concluded in 2015 that Ryan had no case and that he owed Poland roughly $2.7 million for its costs related to the arbitration.

The Polish government's suit seeks that amount plus 12% in annual interest as called for under Massachusetts arbitration law - which it says would apply because Ryan lives here and Schooner is based here, in Boston's Leather District.

Polish complaint in federal court (41k PDF).
Arbitration decision (1.5M PDF).
More documents related to the case.

Free tagging: 


I guess margarine doesn't have good margins.

Voting closed 5

High Times approach

Do not invest in this unless you can afford to lose your entire investment

(actual disclaimer from WBZ radio ad)

Voting closed 5

Parkay? Maybe this person just has bitter butter memories.

Voting closed 4

Will they butter up the judge? They thought they would make a tub of money. You can't fool mother nature. If the judge keeps the jury out, they may soften. They butter have a good case. I hope they stick it to them. How will they grease their palms?

Voting closed 13

The company name should have been a warning sign from the start:

38 Oleos

Voting closed 6

Of our American businessmen to teach poor Eastern Bloc folks how to do capitalism.

Voting closed 5

What does Archie Bunker think of this??

Voting closed 3

Joe - murder,

Vin- margarine.....

Voting closed 2

And they all came back, shook my hand, and we had a great time on the
Bench talkin' about crime, mother-stabbin', father-rapin', all kinds
Of groovy things that we was talkin' about on the bench, and everything was fine.

Voting closed 3