Judge Rejects Freedom Industries Bankruptcy Plan

U.S. Bankruptcy Judge Ronald Pearson, in a 10-page order, said Freedom Industries' plan was not acceptable primarily because of "the unsettled terms of environmental remediation, a matter of highest priority in the case."

By Ken Ward Jr.
The Charleston Gazette

A federal judge on May 13 rejected the latest bankruptcy plan from Freedom Industries and ordered the company to focus on meeting state Department of Environmental Protection mandates about cleanup of the company's Etowah Terminal, site of the January 2014 Elk River chemical spill that contaminated drinking water for 300,000 area residents.

U.S. Bankruptcy Judge Ronald Pearson turned down a request from Freedom for an expedited status conference to discuss the company's growing dispute with DEP over remediation of the site and sided with an earlier objection from agency officials to a $6.7 million bankruptcy plan that would have set aside just $150,000 for future cleanup work.

Pearson, in a 10-page order, said that Freedom's plan was not acceptable primarily because of "the unsettled terms of environmental remediation, a matter of highest priority in the case."

"Remediating the ongoing threat to public safety through contamination of the region's water supply is essential ... both because another incident of water contamination would consume [Freedom's] resources, and because the WVDEP police powers and enforcement capabilities could tie up all [Freedom's] assets if the WVDEP deemed there was a continued threat to public safety and health," the judge wrote. Pearson questioned whether Freedom's latest plan obtains enough money from former Freedom officers and owners to pay off the company's debts and fund cleanup activities.

Freedom's proposed plan, filed on April 30, would distribute about $2.7 million to spill victims and $500,000 to other Freedom creditors and pay off the company's tax debts, but also set aside $2.2 million for payments -- subject to court approval -- for lawyers, consultants, and other professionals for work through February 2015 processing the case. Another $400,000 is estimated for payments to professionals for work since March 1. Those payments, though, would need to be approved by Pearson, who has repeatedly complained about what the judge said were excessive billings from professionals.

Funds for the plan would come from Freedom's previously reached $3.2 million settlement with its insurance company and from a $2.8 million payment from former Freedom owners and officers, along with an additional $300,000 payment from former Freedom President Gary Southern.

"While the court does not make a definitive finding, it seems clear that those responsible for overseeing the storage of potentially hazardous materials were less vigilant than required over several years with respect to these responsibilities prior to the spill incident at the Etowah River Terminal," the judge wrote. "This has resulted in criminal charges against these parties. The settlement amounts barely scratch the surface of the damages resulting from conditions existing during their stewardship."

The judge's order comes less than a day after Freedom's chief restructuring officer, Mark Welch, had filed a new statement with the court, trying to propose a compromise with DEP that would have provided $250,000 for short-term water treatment and soil disposal at the site while a broader agreement on long-term cleanup work could be negotiated.

DEP had harshly criticized Welch's April 30 bankruptcy plan, saying it put the interests of the company's bankruptcy lawyers and consultants ahead of funding an appropriate cleanup at the site.

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