CHARLESTON, W.Va. (AP) — When state inspectors showed up
unannounced at Freedom Industries to investigate a licorice odor wafting
across West Virginia’s capital city, company executive Dennis Farrell
seemed to brush off any cause for concern.
But inspectors quickly
found what was already contaminating the water for some 300,000 people: a
chemical oozing from an above-ground tank and escaping through an old,
cracked containment wall. A bag of absorbent material had been placed
nearby and weighed down with a cinder block in a failed attempt to stop
the flow.
"When they approached the tank, (Farrell) said they just discovered a leak," Jesse Adkins, the
inspectors’ supervisor, said.
The
encounter between state officials and Freedom Industries provides a
window into the little-known and lightly regulated firm whose spill of a
coal-cleaning chemical contaminated the drinking water for West
Virginia’s capital city. The consequences from the spill — government
investigations and lawsuits — mark the biggest crisis that Freedom
Industries has faced in its nearly 22-year history since one of its
founders went to prison on tax charges. The U.S. attorney has pledged to
determine who is responsible, and numerous businesses have sued because
they were forced to close and lost money until the water was safe
again.
A spokesman for Freedom declined to comment Tuesday. The
company’s president, Gary Southern, answered questions at a brief press
conference Friday that ended shortly after he complained that he was
tired. Farrell said Tuesday that he could not discuss the spill or the
company’s operations.
"It’s not that we don’t want to," Farrell said. "It’s that one, we’re a little busy, and
two, we’re not ready."
The
terminal with the leak — which hadn’t been inspected by state officials
since 2001, when it was owned by a different company operating under
more stringent rules — was bought by Freedom Industries last month,
state officials said. It was previously owned by Etowah River Terminal
LLC, a company that effectively operated as an arm of Freedom Industries
even before the two firms officially merged at the end of December.
Etowah
was formed in 2001 to purchase the terminal site, and Freedom was the
sole member of the Etowah corporation, according to legal filings and
corporate records. The tanks allowed Freedom to receive barge shipments
of chemicals.
Freedom Industries traces its start back to 1992,
when Carl Kennedy II filed the incorporation papers. Kennedy and Farrell
owned a 50-50 stake in the venture, according to a legal claim that
Freedom Industries filed years later against Kennedy. During its early
years, the company sold chemicals designed to prevent airborne dust on
coal haul roads. It averaged roughly $50,000 to $60,000 in annual
revenue.
That business effectively ended in 1997 when Farrell went to work for another company, Tetra Chemicals
Inc.
He
did not stay long. The following year, Farrell and several other
employees at Tetra decided to start their own company specializing in
mining products, dust control chemicals and other chemicals. The
chemists and chemical engineers in that group wanted to add a facility
so they could blend chemical products that would then be sold, according
to legal filings.
Rather than create a company from scratch,
Farrell folded the new business venture into the corporate structure
that Kennedy created for Freedom Industries, which still existed on
paper but was doing little to no real business.
As a privately
held company, Freedom Industries was not required to file detailed
financial records for the public. However, there are indications that
the company was growing. Kennedy owned 5 percent of Freedom’s stock,
which he estimated was worth $675,000 when he filed for bankruptcy in
2005.
Kennedy would eventually cause a crisis for the company. As
an accountant and officer for Freedom Industries and two related
companies, Kennedy was responsible for collecting taxes from employees’
paychecks and then turning them over to the government.
But in
early 2004, he received a visit from a federal investigator who told him
they were looking into allegations of tax fraud. Kennedy’s response: He
knew they were coming, he had crossed a line, and he would eventually
have to pay the IRS back.
The comments were included in
transcripts of a court hearing after Kennedy pleaded guilty to tax
evasion and willful failure to pay employees’ withholdings. He was
sentenced to three years in prison, but his sentence was later reduced
to a year and a half.
A phone listing for Kennedy could not be
immediately found, and his former lawyers did not return messages
seeking comment. Farrell said Kennedy had not been with the company for
years.
Prosecutors accused Kennedy of withholding more than $1
million from employees’ paychecks between 2000 and 2003 — and diverting
some of that money for his personal use.
During the case, Kennedy
disclosed that he owned a 1981 Piper Warrior Airplane and land in Rum
Cay in the Bahamas. He said that he and Farrell each owned several lots
on the island.
In the court transcripts, the government hinted that Kennedy was not alone.
"Kennedy,
with the knowledge and consent of at least one other person, prepared
false books and records which claimed that withheld taxes had, in fact,
been paid to the IRS, when, in fact, Kennedy and the other responsible
person knew they had not," according to the document.
But prosecutors didn’t name the other person who might have known.
In
the transcript, Kennedy told a prosecutor that "there were two other
individuals in the corporation that were aware that the taxes were not
turned over to the government."
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Associated Press writer Ray Henry contributed to this report from Atlanta.
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