Sean Carothers, president of Carothers Construction Co., on Tuesday entered a guilty plea to mail fraud and agreed to pay the state $250,000 for his role in a failed beef-processing plant that was built, in part, with bond proceeds.
Prosecutors are recommending that Carothers be sentenced to supervised probation instead of jail time and will take no action against his contractor's license. Carothers agreed to cooperate with the U.S. attorney's office, according to a plea agreement.
Carothers, under oath, agreed to plead guilty to aiding in a scheme to obtain money and property for Richard Hall, the owner of Mississippi Beef Processors LLC, an economic development project that received state-issued bond proceeds and a state loan guarantee.
In January 2006, Hall admitted to using more than $751,000 of public and company funds for personal use. He agreed to plead guilty to mail fraud and money laundering in return for his cooperation in the ongoing investigation. He still has not been sentenced.
Carothers admitted that he illegally gave Hall $173,130 in consulting fees. Carothers was supposed to receive $15.5 million to build the plant, but his company received $18.8 million.
The beef-processing plant project was spearheaded by state lawmakers to create 400 new jobs in a depressed area of the state. The beef plant shut down in November 2004 after operating for only three months.
In January 2005, Hall defaulted on a $35 million loan from Community Bank that was guaranteed with state general obligation bonds. However, Mississippi lawmakers passed and Gov. Haley Barbour signed a bill that provided $35 million in cash to pay off the loan instead of using bond proceeds.
Originally, Hall estimated the plant would cost $22 million. The state provided a $5 million start-up grant, but ultimately guaranteed several loans - to be financed with bond proceeds if necessary - when Hall could not obtain financing.
State agencies also contributed $8.5 million of taxable GO proceeds toward the project. The bonds have maturities to 2013. The state ultimately paid consultants to manage construction of the plant and the cost rose to $35 million. Cities and counties near the plant also contributed funds for infrastructure.
The total cost of the defunct project was more than $55 million.
