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Sherman proposal marked by questions, promises



Published: Mon, July 19, 2010 @ 7:04 a.m.

By GRACE WYLER

gwyler@vindy.com

CAMPBELL

When a Pitts-

burgh company announced its intention to build a multimillion-dollar steel mill where Youngstown Sheet & Tube’s Campbell Works once stood, some local and state officials were quick to laud steelmaking’s return to the Valley.

The company announced in June its plans to build a cold-rolling mill on 40 acres of industrial property it owns in Campbell. The company claims to have a four-phase plan to expand the mill on

70 acres of adjacent property in Youngstown.

The initial project would employ 700 people, and if subsequent phases are completed, the mill would employ 3,500, the company said.

“This will revitalize Campbell,” Campbell Mayor George Krinos said when the plans were announced.

Struthers Mayor Terry Stocker echoed that enthusiasm.

“Obviously there would be jobs available for everyone, like back in the old days,” Stocker said.

However, few of the elected representatives involved in the project appear to have investigated the background of Sherman International and its owners.

The company – and its owners, Krishna Sharma and her husband, Om Sharma – have legal and financial difficulties that date back several years, including:

Federal charges of criminal conspiracy with another Sharma-owned company related to the international shipment of potential nuclear materials.

Defaults on nearly

$3.5 million in commercial loans.

$130,000 in unpaid penalties to the Occupational Safety and Health Administration.

$22,000 in delinquent taxes owed on Sherman property in Youngstown.

Multiple citations from the Ohio Environmental Protection Agency for contamination on its property in Campbell.

The company has not revealed many details of its business plan, whether the company has potential investors or partners or if it has the financial ability to move forward with the project.

The Sharmas initially declined to comment on their legal and financial troubles, referring questions to former Struthers City Council President Robert Carcelli, the company’s spokesman for the project.

Though he provided no documentation, Carcelli said the initial phase of the plan could cost about $400 million, and the completed project could top $1.5 billion.

Carcelli, who has long sought redevelopment projects for the Mahoning River corridor, said he approached the Sharmas about the project in 2008.

“This is the first person in 33 years that has come up with a business proposal along that river,” Carcelli said. “What’s at stake here are jobs — jobs that the city of Campbell badly needs. People have said that now there might be hope.”

In a series of interviews with The Vindicator Friday and Saturday, after he became aware of the impending story, Om Sharma reaffirmed Sherman International’s commitment to the project.

“We want to put a steel mill to create jobs there,” he said. “We are a business, that’s what we do.”

THE PLAN

Though some officials are already discussing employment numbers, nothing will get under way until the company secures government funding for an environmental study and cleanup, Carcelli said.

Carcelli approached Krinos and state Sen. Joe Schiavoni of Canfield, D-33rd, about the project in January. The three have been working with Gov. Ted Strickland’s office and the Ohio Department of Development to secure state funds to clean up and redevelop the land.

The city of Campbell, on behalf of Sherman, applied for a Clean Ohio grant last month, which would provide up to $300,000 to assess the extent of environmental contamination on the property. If the grant is approved, the city would ask Clean Ohio for $3 million to clean up the site.

A new project, such as Sherman’s steel mill project, is not required to secure funding for a cleanup study. But such a project must be in place for the city to receive the $3 million cleanup grant, officials said.

After the land has been cleaned up, the company will begin construction on the first phase of the steel mill, Krinos said. He added that Sherman appears to be serious in its intentions to move forward with the project.

“This is a large, international company with a good reputation,” Krinos said. “The goal, if Sherman International comes in and if this does happen the way we anticipate they would, is for them to build a state-of-the-art steel mill.”

Sherman is currently in the business of refurbishing and supplying equipment for steel mills, and also does engineering and design consulting for mills.

Sherman’s sales fluctuated between $5 million and $23 million, and net income hovered between $1 million and $2 million from 2002 to 2006, according to the business plan Carcelli provided to The Vindicator. That plan offers no financial information for the years after 2006.

The steel mill would be a “renewable energy facility,” the plan states. Carcelli said Sherman plans to use solar and wind energy to power the plant.

The mill’s first phase, the plan says, would produce sheet-steel products for the automotive and construction industries, as well as for appliances and heating and cooling systems. The second phase would be a rebar mill that would make the reinforcements used in construction, and the third complex would be a plate mill to make “armor and other plates for defense.” The final stage would be a melt facility that would make the steel used in the other mills.

“This is not just an ordinary mill,” Carcelli said. “It will be one of the first of its kind in the United States.”

The plan does not include a time line or estimated costs for the project, nor does it review the company’s capability to execute the proposal or the market demand for the products the mill would make.

The company chose the Youngstown area for the project, the plan states, because of the region’s location and workforce, and “to take advantage of incentives provided in an economically depressed area.”

RECENT HISTORY

Krishna Sharma and Om Sharma, chief executive of Sherman International, have been affiliated with several other companies.

They are the former owners of Riverview Steel Corp., a mill in Glassport, Pa., that the couple bought out of bankruptcy in 1997.

During the five years that the Sharmas operated Riverview, the company was cited for numerous health and safety violations by the Occupational Safety and Health Administration. The company was fined $129,812 in penalties for the violations, which included open pits, unsafe forklifts and overhead cranes, wet floor conditions and failure to provide a rail stop where employees loaded and unloaded material near a natural gas pipe. The latter is considered a “serious violation” by OSHA.

In 2001, Riverview filed for Chapter 11 bankruptcy and ceased mill production. The bankruptcy case was dismissed and the company turned the mill over to the bank.

Om Sharma, in an interview Saturday, said that he was not aware of the OSHA violations. Riverview failed to pay the OSHA fine and in 2006 was exempted because the company was considered insolvent.

In 2001, Sherman International defaulted on two commercial loans. The loans, one for $2.5 million and a Small Business Administration loan for $978,853, were granted by First International Bank, a Connecticut-based chartered bank.

In October 2007, Spares Global, another company owned by the Sharmas based at the same Pittsburgh address as Sherman, was charged with conspiracy to commit federal violations related to the shipment of graphite, a material that can be used in nuclear reactors and missile nose cones.

The graphite was shipped to a trading company in the United Arab Emirates and was later found in Pakistan. Om Sharma was president of Spares Global when the company pleaded guilty to conspiracy in U.S. District Court in the Western District of Pennsylvania and was ordered to pay a $40,000 criminal fine.

Spare Global was not aware that it needed a special license to ship graphite, Om Sharma said Saturday. He claimed that there was no conspiracy to falsely represent where the graphite came from. But the company agreed to plead guilty to avoid a legal battle with the federal government.

Spares Global had failed to pay the fine as of September 2009, according to court documents. In court testimony during a hearing regarding the company’s failure to pay the fine, Om Sharma said that Spares Global “owed $351,000 to various vendors” and no longer had an accountant.

In the court transcript, a lawyer for the U.S. Attorney’s office accused Om Sharma of transferring Spares Global’s assets to Sherman in order to avoid paying the fine.

Locally, Sherman owes $22,281.13 in taxes on a 71-acre parcel in Youngstown that is taxed at about $9,600 per year. The taxes on the Campbell property targeted for the steel mill are current.

Om Sharma said the company had “made a deal” with the county after tax assessments continued to reflect property values that went unchanged after buildings on the property were demolished. Sherman is making payments on the back taxes, and has not been in default on its taxes for the last year, he said.

Although he is aware of the Sharmas’ legal troubles, Carcelli said Sherman’s history is not relevant to its plans in Campbell.

EPA TROUBLES

Since 2004, Sherman has been cited numerous times for Ohio EPA violations related to an oil spill on its Campbell property.

The company has allowed oil to seep unabated into the Mahoning River and the storm sewer since 2008, said John Kwolek, district engineer for the Ohio EPA’s regional office.

In a 2010 investigation, Kwolek found that the site’s ground-water recovery system, which had contained the oil since it was first identified in the 1990s, is now “totally inoperable as a result of activities in 2008-09 to recover scrap metal from the soil.”

The agency’s repeated attempts to contact Sherman about the violations have been “largely ineffective,” Kwolek said.

Om Sharma sent one letter to the EPA, stating that no manufacturing has taken place on the property since 1983.

The state EPA was considering enforcement action against Sherman, but stopped that procedure in light of the city of Campbell’s Clean Ohio grant application, according to agency spokesman Mike Settles.

Sherman has hired a company that is now in the process of fixing the ground water recovery system, Om Sharma said Saturday.

WHO KNEW WHAT

Krinos admitted that Campbell has not done a thorough background check on Sherman. But when presented with details of the company’s past, Krinos was steadfast in his support: “This company is clean as a whistle.”

“I don’t believe that the senator [Schiavoni] or the governor would be involved in this project if there were any concerns,” he said.

Schiavoni said he recently learned that the company might not have the financial ability to execute the project, but said he remains focused on ensuring that the city gets state funding to clean up the land. He was not aware of Om Sharma’s involvement in the federal fine.

“I don’t really care who the owner is,” he said. “I was excited about the possibilities down the road, but first things first: We have to get this property cleaned up.”

He added it is too early to tell whether plans for a new steel mill will come to fruition, or how many jobs would be created. “It was a little bit upsetting to me that people started giving out job numbers,” Schiavoni said. “I don’t want to give people a false sense of hope.”

Schiavoni said he had done limited background research on the company because the project is in its early stages. He added that initial background checks will be done by the Ohio Department of Development and a more extensive investigation will likely be done after the environmental assessment is completed.

The DOD is aware of the Sharmas’ companies’ legal troubles, including the federal fine, said Mark Barbash, chief economic development officer for the agency. It will continue to investigate the company’s background as the project moves forward.

The department’s investigation – and how the findings might affect funding for the project – are confidential, Barbash said.

“At the end of this, we will know everything we need to know,” Barbash said. “All of it will be taken into consideration.”

FOCUS ON JOBS

Gov. Strickland’s economic development team has been “very involved” in the Sherman project and has done “extensive background checks” on the company, said Amanda Wurst, the governor’s press secretary.

“Job creation is Gov. Strickland’s No. 1 priority,” Wurst said. “The governor’s economic development team is always going to pursue new jobs, especially if those are jobs coming over here from China.”

Although there is no evidence that Sherman will move any jobs from China to Campbell, the company has said it will produce the same type of steel products imported from China at a competitive cost, Barbash clarified.

“We are always looking to increase domestic production,” he said.

But industry experts raised questions about the economic viability of another cold-rolling mill in the current North American market. Cold-rolling mills, like the one Sherman has proposed, make the sheet steel products used in the automotive and construction industries, as well as in appliances and heating and cooling systems.

Another U.S. cold-rolling sheet mill could be met with some skepticism in the U.S. steel industry, said Christopher Davis, managing editor of the North American edition of Steel Business Briefing, a trade publication.

“There are concerns about whether there is enough demand in the steel-sheet market to match domestic capacity,” Davis said. “A lot of people in the industry are pushing for mills to take production off line.”

While there is opportunity for mills making the steel pipe and tube products used in natural gas drilling in the Marcellus Shale and similar formations, steel industry experts believe that there may be too much sheet capacity in the North American market, he said.

DESPERATE TIMES

Others have been more tepid in their response to the Campbell/Sherman International steel mill proposal.

State Rep. Robert Hagan of Youngstown, D-60th, said he has not participated in the planning.

And despite Sherman International’s plans to expand the mill into Youngstown, Mayor Jay Williams said the city has not been involved in the company’s plans, but that Youngstown “stands ready” if the project comes to fruition.

In the absence of more specific details about those plans, residents should be wary to accept the proposal as a fait accompli, warned John Russo, co-director of the Center for Working Class Studies at Youngstown State University.

“These types of projects that have been historically suggested are representative of the politics and economics of desperation,” Russo said.

Local politicians have often attached themselves to economic development proposals that promise job creation without looking into the long-term viability of the projects, he said.

“These ideas get some traction because there has been a long period of decline in this area,” Russo said. “If there is any possibility that can promote a couple of jobs, people might be willing to suspend their disbelief.”


Comments

1justsayin(42 comments)posted 4 years, 2 months ago

Some food for thought:

1. “This company is clean as a whistle.” Only a politician could hear the points made in this article and utter those words.
2. "Carcelli said Sherman plans to use solar and wind energy to power the plant." A cold rolling mill of any size will have motors rated at 5000 HP or even bigger. The whole steel mill site will have to be covered with solar panels and windmills. What an outstanding use of buzzwords to get the public foaming at the mouth.
3. "The initial project would employ 700 people" I'll gladly give a reward to the first person that shows me a domestic cold-rolling mill that employs 700 people. Nucor has complete steel mills melting steel, casting, hot-rolling, cold rolling and processing with less than 700 people employed.
4. "Krinos admitted that Campbell has not done a thorough background check on Sherman." It's typical of the politicians to not want to dig too deep into a company's background. They're afraid that they'll find a company like Sherman.

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2UnionForever(1470 comments)posted 4 years, 2 months ago

Maybe they could build some airships on that land too!!!

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3VINDYAK(1799 comments)posted 4 years, 2 months ago

If he gets federal funding for cleaning up his property and the steel plant does not get built, the net result is that his property is now cleaned-up and more valuable at the expense of the taxpayer.

Now, the question is...is this worth the investment? The answer could be yes. Yes, because the Valley is desperately seeking manufacturing plants, businesses and citizens to invest in the area. Yes, because cleaning up old industrial property improves the area. Yes, because there are no other options proposed.

So, despite the history, you have to make a vested attempt in helping all you can, because if it works, great and if it does not work, then we at least can say we gave it our best shot and we have shown others that we are willing to work with companies to help them grow. History has proven that when companies in our Valley grow, so does the area.

Right now the area does not look all that good, but with the recent good news with VMI there is room for optimism as well as a glimmer of teamwork that has begun to show its work in a positive way. This should not be about politics. This is about people, families and jobs. We need businesses to understand they are welcomed here and we will work with them, not against them.

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4ytownsteelman(628 comments)posted 4 years, 2 months ago

A solar and wind powered steel mill! Hahahahahahahahahaha

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5MichaelG93(79 comments)posted 4 years, 2 months ago

Looks like Sherman International handles their finances like our mayor does!!!! Just on a larger scale. These two will fit well together.

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6sknirak(120 comments)posted 4 years, 2 months ago

Let me understand this. Solar and wind powered mill. Doesn't this area have over 220 days of clouds and overcast? Does this mean the solar panels will connect to batteries with large storage cpacity? And windmills? Would this area have enough wind power to operate the number of windmills needed to supply power to the plant? (That is, not counting the hot air from the politicians).
And where would the wind mills be located-on the high ground on both sides of the river or along the valley itself?

Ytownsteelman's comment sums it up for me.

And yeah, the "track record" of these people doesn't inspire any confidence in me, anyway. They got money problems and they come here to Appalachia?

Ain't gonna happen.

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7FormerYtowner(96 comments)posted 4 years, 2 months ago

Finally the VINDY put a great story together and dug into the past where none of these blowhard politicians wanted to!

Great job VINDY!

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8QCfan(3 comments)posted 4 years, 2 months ago

This project will never fly.

They will use solar? It's dark and dreary here for most of the year, especially winter. Yeah, right! Solar power.

Windmills? I agree with Sknirak. The project will desperately need "the hot air from the politicians..."!

Let me spell it out for Campbell's and Struther's officials. The project's owners are f-r-a-u-d-s!

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91970mach1(1005 comments)posted 4 years, 2 months ago

Even w/o this story, everyone already knew such a huge project isn't going to happen.

However, the applications to clean up the site are real .So what is the intention?

Maybe the owner is just trying to find a way to get the site cleaned up (w/someone else, taxpayers, to pay the bill) to get the EPA off his back?

It isn't realistic to think such a mill project will really ever go forward here, so is it really worth it to spend govt. $$$$$ to bail out the landowner?

Even if the clean-up happened and the landowner gave the land to the city for free afterwards, it really doesn't do the area much good as far as jobs creation and owner gets free cleanup.

Hopefully govt leaders will look very carefully at this before they spent any money on it.

I hope I am wrong and this is all legit, but just doesn't seem like it.

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10Lifes2Short(3877 comments)posted 4 years, 2 months ago

Nice informative report. Should be interesting to see how this plays out.

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11iBuck(220 comments)posted 4 years, 2 months ago

Of course, if they were local people (little people), they'd have to pay the fines, pay off the creditors, pay off the back taxes, personally put in a few hundred hours of community service for past sins, do the clean-up, pay for the confirmation of clean-up study, build the new plant... and then they might give us a fractional break on the local taxes. But since they're "experts from afar" with a paid lobbyist, the local pols are falling all over each other.

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12author50(1121 comments)posted 4 years, 2 months ago

Please put the Sherman Steel Factory next to The Avanti Plant, the downtown baseball stadium, the blimp factory and least we forget... Vicki Sherlock's sonic ring.

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13theword(342 comments)posted 4 years, 2 months ago

Ha Ha Ha where is LOL and CMHS68 at? Not on here saying this is going to happen now are they.

What a joke, keep drinking the kool-aid, October will be here sooner then later.

What is the mayor going to do when the city runs out of money in October? He doesn't want to get rid of his political hack employee and that fireman and this will cause more employees to lose their jobs.

Great job mayor!!!!!!!!

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14Peepers(3 comments)posted 4 years, 2 months ago

The site should be cleaned up regardless, which will give the property a higher re-sale value. That's probably a big reason for the tax-funded clean-up, along with this paragraph from the article:

"The state EPA was considering enforcement action against Sherman, but stopped that procedure in light of the city of Campbell’s Clean Ohio grant application, according to agency spokesman Mike Settles."

Still, the amount of defeatism in your community, as is evident on this forum, is profound and self-perpetuating. If you Little Abners and Droopies were so good at predicting the future (ie: "This will never happen because nothing good ever does") what are you doing posting here instead of counting your stacks of money on a beach someplace? Stop waiting for the future. Get out of your mother's basement and go make the future happen. Wanna know why something isn't happening in your city? Look in the mirror you losers.

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15WarrenRicheyKid(167 comments)posted 4 years, 2 months ago

Hats off to Grace Wyler for a great job of investigative reporting. If this sham outfit of Sharma & company get booted out of town before ripping us all off, it will be thanks to this Vindy reporter. Grace, please keep covering this story.

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16valleyview312(8 comments)posted 4 years, 2 months ago

Casey equipment cleans transformers on this property next to the river with no public sewer for 20 years, the Vindy should investigate where the few people that work there and the other employers of the slave labor that work there have no public restrooms for twenty years. The Vondicator only wrote the story because its in Campbell, if it was in North Jackson or Deerfield where polluters run rampant the Vindy doesn't care. It kills the Vindicator to write a positive story North of the polluted Mahoning River! 33 years since mills closed, two Brides and a road to nowhere and no jobs, no public sewer, and the Vindicator rips the only prospect on the River for 20 years. I'll give you one, Astro Shapes got 40 acres of clean property from Struthers a new Road for minimal investment almost four years ago WITH NO BUSINESS PLAN!!! Vindy won't investigate that or itself when they received cleaned up property for free on the backs of taxpayers. Cancel your subscription !!!

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17Stan(9923 comments)posted 4 years, 2 months ago

Let's bring Barney Frank to the proposed plant site and have him secure federal funding for it . If he pulls it off then we will build a statue in his honor and place it in front of City Hall .

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18borylie(790 comments)posted 4 years, 2 months ago

I'm usually very critical of the Vindy,but this kind of investigative journalism I enjoy and expect. Very good work Grace Wyler and the Vindy.

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19Billybob21(96 comments)posted 4 years, 2 months ago

This is a very good article. Makes you wonder what all the polticians research if anything

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