PORTLAND – The state filed a lawsuit Tuesday claiming that the former owner of Great Northern Paper owes more than $25 million in severance pay to workers who lost their jobs when the company went bankrupt.

Attorney General Steven Rowe alleges in the four-page complaint that Inexcon Maine Inc. owes back pay to more than 1,100 employees who were eligible for severance under Maine law.

Great Northern Paper Inc., which was owned by Inexcon Maine, shut down its mills in Millinocket and East Millinocket two years ago and filed for bankruptcy protection in January 2003 in U.S. Bankruptcy Court.

“State law provides severance pay to these workers,” Rowe said in a prepared statement. “We promise to work as hard as we can to help these workers get what their long service has earned them.”

Nicholas Walsh, a Portland attorney who represents Inexcon, said Maine law stipulates that a company is not liable for severance pay if there’s a final bankruptcy order.

“It’s a misbegotten, politically driven lawsuit,” Walsh said. “It ignores the law and it does a discredit to the state of Maine.”

The Great Northern mills once employed about 4,500 people at their peak in the early 1980s and powered the Mount Katahdin region’s economy. When Great Northern declared bankruptcy, it not only put 1,130 people out of work but also showed the decline of the paper industry in the region.

The mills have since been bought by Toronto-based Brascan Corp. Both mills are now running under the name Katahdin Paper Co. with approximately 550 employees.

Assistant Attorney General William Laubenstein said it has taken time to determine how many employees were eligible for severance and what the potential payout might be.

Under Maine law, companies with more than 100 workers have to pay employees with more than three years of service one week of severance pay for each year at the company, he said.

He said Maine law states that companies are not liable for severance when their bankruptcy is completed. But the law was amended a couple of years ago so that bankrupt companies’ parent corporations are liable for severance, he said.

In this case, Laubenstein said, it was Great Northern that went bankrupt. It is Great Northern’s parent company, Inexcon Maine, that is on the hook for severance pay, he said.

The state’s lawsuit was filed a day before Rowe stands for election by the Legislature for another term as attorney general.

But Walsh said it’s a “near-frivolous lawsuit paid for by taxpayers.” He said if Inexcon Maine hadn’t bought the mills from Bowater in 1999, they would have shut down a long time ago.

“The way the attorney general is acting, the state of Maine may as well hang a big banner off the bridges coming into the state that say, ‘Big business, Maine doesn’t want you,'” he said.