Awash in Toxic Water: About this time last year, more than 300,000 people were without water thanks to a toxic chemical that leached into the Elk River in West Virginia, while the company responsible for the spill simultaneously sought to protect its assets and thwarted cleanup efforts.
Freedom Industries purportedly allowed about 7,500 gallons of a chemical known as “crude MCHM” to leach unchecked into the water supply and then, even before water was completely restored to residents, took legal action to effectively put a hold on liability suits filed against it. The company also shocked regulators by waiting two weeks to disclose that a second chemical, PPH, was present in the spill and then refusing disclose information on its proprietary formula.
Underlining the company’s obvious concern for profits over people was what U.S. Bankruptcy Judge Ronald Pearson called “one of the most unique Chapter 11 cases I've ever seen,” according to the Charleston Gazette.
The bankruptcy filing and a subsequent emergency motion for “debtor-in-possession” financing (DIP) was designed to allow Freedom to borrow up to $4 million to pay debts and continue operations. It also puts 28 lawsuits filed against the company on hold.
The workings of the case were labyrinthine and slightly suspect, including the two lenders who would provide the financing. According to the Gazette, both financing companies were incorporated the day before Freedom’s filing and can be tied to Clifford Forrest, the owner of Chemstream Holdings, Freedom Industries' parent company.
The West Virginia American Water Co., which operates the infrastructure infiltrated by the spill, unsuccessfully asked the judge to deny Freedom’s DIP financing, stating that it “reeks of collusion,” and was a “loan to own scheme,” the Gazette reported.
Knee Deep in Trouble: While the company itself will likely have limited liability for the spill, an indictment issued by U.S. District court last month named four company officials negligent for their part in the spill.
Former Freedom owners Dennis Farrell, William Tis, and Charles Herzing, and president Gary Southern were each charged with three counts of violating the Clean Water Act. Their failure to exercise reasonable care in running the company is what ultimately caused the negligent discharge of the pollutants, according to the indictment.
“Farrell, Tis, Herzing, and Southern approved funding only for those projects that would result in increased business revenue for Freedom or that were necessary to make immediate repairs to equipment that was broken or about to break,” the indictment stated.
In separated proceedings, Southern was also arrested and charged with wire fraud, making false statements under oath, and bankruptcy fraud, according to the New York Times. Those charges are related to Southern’s attempts to downplay his role in Freedom Industries and protect his personal assets, according to a criminal complaint lodged by the Federal Bureau of Investigation.
Freedom Industries entered a plea agreement with federal authorities that will limit fines and block restitution claims for the company’s crimes, according to the Charleston Gazette.
“This will permit Freedom to focus its time and limited resources on its environmental cleanup obligations and addressing the claims of its creditors,” Mark Welch, Freedom’s chief restructuring officer told the Gazette.
Wading through Solutions: If convicted, Farrell, Tis, and Herzing could face up to three years in prison, and Southern faces up to 68, according to the Gazette.
Regardless of the outcome, many in the region ruled by coal companies see the indictment as hope that the industry will begin to be held accountable. Attorney General Eric Holder has said the case sends a strong message to polluters.
“They put an entire population needlessly at risk,” the Gazette quotes Holder as saying. “Such conduct cannot, and will not, be tolerated. These law enforcement actions send an unambiguous message that compliance with environmental safety standards is an obligation, not a choice.”
Some West Virginia activists disagree, though. People like Junior Walk of Coal River Mountain Watch say that holding a few individuals guilty for widely accepted practices diverts attention from the state's widespread evironmental woes.
“These guys are scapegoats. They’re just the ones that got caught,” he told The Atlantic. “The industry and its proponents in our government want us to believe these guys are just a few bad apples, that these are all isolated incidents. Well, they’re not. The whole damn system is guilty.”