CHARLESTON, W.Va. (AP) — The company blamed for a
chemical spill that left 300,000 West Virginians without safe drinking
water filed for bankruptcy Friday, temporarily shielding it from dozens
of lawsuits, many by businesses that were forced to shut down for days.
Freedom Industries Inc. also used its bankruptcy papers as a forum to hypothesize about what caused the
spill.
The
company filed a Chapter 11 petition with the U.S. Bankruptcy Court in
the Southern District of West Virginia, eight days after the spill was
discovered.
Company president Gary Southern signed the paperwork,
which lists both the company’s assets and liabilities as being between
$1 million and $10 million. It says the company has at least 200
creditors and owes its top 20 creditors $3.66 million.
The
bankruptcy proceedings temporarily halt the lawsuits against Freedom
Industries, said Charleston attorney Anthony Majestro, who is
representing several small businesses that sued the company. Majestro
said his clients are weighing an option to petition the court to proceed
in hopes of collecting on Freedom’s insurance policy. It depends on the
company’s level of coverage, Majestro said.
Matt Ballard,
president of the local business group Charleston Area Alliance, said
last week he couldn’t put a number on how much money businesses had
lost.
The bankruptcy filing doesn’t stall lawsuits against other
parties targeted in the spill, said Washington, D.C., attorney H. Jason
Gold, a bankruptcy expert who is not involved in the pending lawsuits.
Nor does it free Freedom Industries from its responsibility to rectify
environmental damage caused by the spill, said Department of
Environmental Protection spokesman Tom Aluise.
Some of the
lawsuits in Kanawha County Circuit Court against Freedom Industries also
name West Virginia American Water Company and Eastman Chemical, the
producer of the coal-cleaning chemical that spilled. Freedom Industries
also owes the Tennessee-based company $127,475, bankruptcy documents
show.
Mark E. Freedlander, an attorney with the law firm
representing Freedom Industries, said in a statement Friday that "the
petition and related pleadings speak for themselves."
According to
bankruptcy documents, Freedom Industries is wholly owned by Chemstream
Holdings, Inc., a company located at the Pennsylvania headquarters of
Rosebud Mining Company.
In the documents, Freedom Industries also
gives a possible explanation for what caused the chemical leak. The
company said a nearby water line burst during last week’s frigid
temperatures, the ground beneath a storage tank froze, and some kind of
object punctured a hole in the tank’s side, causing it to leak. The
document says "It is presently hypothesized" that this is what caused
the leak.
The water was tainted after the chemical later leaked
through a containment area at a facility owned by Freedom Industries.
The water ran into the Elk River, contaminating the state’s largest
water system.
After the spill, residents in a nine-county area
around the state capital of Charleston were told not to use the water
for anything other than flushing toilets. Some businesses and schools
were forced to close for several days. The water restrictions have since
been lifted for all residents, but officials suggest that pregnant
women not drink the water.
The spill has become the focal point of
the state’s 60-day lawmaking session, which started the day before last
Thursday’s spill. Gov. Earl Ray Tomblin announced plans Friday to push
for regulation of above-ground storage tanks. He also wants to require
contingency plans for water companies. State Sen. John Unger,
D-Berkeley, has spelled out specifics to regulate and inspect storage
facilities in SB 373.
In Congress, Sens. Jay Rockefeller and Joe
Manchin, both West Virginia Democrats, have introduced a bill requiring
state inspections of above-ground chemical storage facilities, letting
states recoup costs for emergency responses and setting industry
standards for emergency responses. Sen. Barbara Boxer, D-Calif., is also
a bill sponsor.
Government entities ranging from the U.S.
Attorney’s Office to a West Virginia legislative panel on water
resources are investigating the spill.
The terminal that leaked
had not been inspected by state officials since 2001, when it was owned
by a different company operating under more stringent rules. State
officials said Freedom Industries bought the terminal last month, though
the firm has long been tied to the property.
Freedom bought the
terminal from Etowah River Terminal LLC, a company formed to buy the
terminal site so Freedom could receive chemicals by barge, according to a
2005 court filing. State records show the former president of Freedom
Industries was listed as the manager of Etowah.
A spokeswoman for Gov. Earl Ray Tomblin did not answer a phone call for comment.
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Associated Press writer John Raby in Charleston and Ray Henry in Atlanta contributed to this report.
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