Posted on July 17, 2023
Lake Restoration Solutions, the defunct company that would have terraformed Utah Lake into a real estate developer’s dream, is now looking to dump more than $1 million in debt.
The company filed for Chapter 7 bankruptcy Monday. According to court files, LRS now has only about $2,000 in the bank and a heap of liabilities owed to attorneys, environmental professionals, lobbyists and other consultants. But the biggest bill that might go unpaid is to a local scientist who LRS unsuccessfully tried to sue after he raised questions about the company’s murky finances and lofty claims.
Meanwhile, LRS CEO Ryan Benson appears to have transferred some of the company’s assets to his anti-wolf nonprofit only a few months ago.
“It’s just a sad situation that has happened,” said Roger Kraft, the attorney representing LRS during its bankruptcy proceedings. “This started out as a legitimate business venture with two primary goals, and those goals were to clean up the lake while at the same time developing land.”
LRS has been in a bind since last summer when the Department of Natural Resources put the kibosh on its $6 billion business plan. The company wanted to deepen Utah Lake and use the dredged-up lakebed to build artificial islands, which it would then sell to developers to pay for everything. While the project had significant backing from state lawmakers, state resource managers determined the plan was unconstitutional, since it would privatize a lakebed that is supposed to be managed as “sovereign” land in the public trust.
The company sued the state over the decision in January. In June, it asked a judge to dismiss the case and announced LRS, a limited liability corporation, was going to dissolve.
“[LRS] was met with great excitement by both state and federal agencies, and met by fierce opposition by some,” Kraft said. “That opposition led to extremely expensive litigation to the point where the company exhausted its resources.”
Big Game Forever gets big payouts
In March, LRS transferred $80,000 in capital, and forgave $250,000 worth of debt, to Big Game Forever, a nonprofit Benson founded to lobby against federal protections for wolves, bankruptcy documents show.
“It was owed a tremendous amount of money, and it forgave $250,000 of that debt in return for $80,000 in cash paid to it,” Kraft said when asked about the payment.
Asked what kind of work Big Game Forever did for LRS to incur a $250,000 debt, Kraft said “that’s not a question I can answer.”
Since 2012, lawmakers have given Benson’s Big Game Forever a combined $5.1 million, even after a 2013 audit found the group mismanaged its taxpayer funds. Three years ago, Big Game Forever sued Utah journalist Eric Peterson to prevent him from obtaining public records about how it spent all that money.
The 3rd District Court has since required the Utah Department of Natural Resources to pay Peterson more than $146,000 for its role in helping Big Game Forever keep those records private.
The state hasn’t made any payments to Big Game Forever since 2020. In 2021, Benson became LRS’s CEO. His brother, Jon Benson, became chief operating officer.
‘Thank goodness it fell apart when it did’
Ben Abbott, an ecology professor at Brigham Young University, has long raised concerns about the environmental harms LRS’s dredging project could inflict on beleaguered Utah Lake.
While Benson claimed the artificial islands would improve the lake’s nutrient-plagued water quality, Abbott challenged the assertion, saying LRS has no scientific proof. All the disturbance could, instead, make things worse, he said. And he raised concerns about where LRS was getting all its funds.
LRS hit Abbott with a $3 million defamation lawsuit for some of those criticisms last year. A 3rd District judge threw out the suit in January.
Still, Abbott continued to worry that as the LLC moved forward with its dredging plans, it would simply dissolve mid-project with little consequence, leaving the state holding the bag for any financial and ecological fallout.
“It’s one of the things they sued me for pointing out, that the state could end up being liable for some of these things,” Abbott said. “Thank goodness it fell apart when it did, but we’ve got to reflect on why did this happen?”
Last month, the professor asked for a default judgment of $396,500 to cover his expenses and time lost while embroiled in the LRS case. While the court hasn’t made a decision on that request, the company never filed any opposition.
LRS’s bankruptcy documents list them owing $390,000 to Abbott, making him their largest creditor. The company also hasn’t paid Foley and Lardner — the legal firm it hired to take Abbott to court. It still owes those lawyers $328,149.
And they are not the only legal teams that could go unreimbursed — LRS owes Ray Quinney and Nebeker $175,000 for “attorney fees awarded in suit vs. Abbott.” It also owes attorney fees to Snell and Wilmer for more than $10,000 and Mayer Brown for more than $600.
The company owes Utah-based Geosyntech Consultants more than $47,000 and Seattle-based Anchor QEA nearly $9,000, both for environmental studies.
Lobbying firm Grayling has unpaid bills totaling nearly $33,000. Wyoming-based 4TW LLC stands to lose nearly $20,000 worth of market research. Utah public relations firm Wilkinson Ferrari could lose more than $7,000.
Kraft, LRS’s attorney, said the Bensons could have simply dissolved the company and walked away without declaring bankruptcy at all.
“They said they wanted neutrality and transparency,” Kraft said.
They will face their creditors and a federal trustee during a hearing on Aug. 2.