John Galt Faces Prison For Contaminating West Virginia Water

Back in January, John Galt proclaimed his independence from pesky regulatory oversight in West Virginia when he contaminated the drinking water supply of over 300,000 residents. Recall that Galt did his damage through his appropriately named corporation, Freedom Industries, where he was using the contaminant to magically make coal “clean”. In a remarkable development, though, we learned yesterday that a federal grand jury has indicted six people associated with Freedom Industries:

A federal grand jury on Wednesday indicted four owners and operators of the company whose toxic chemical spill tainted a West Virginia river in January, forcing a prolonged cutoff of drinking water to nearly 300,000 residents in and around Charleston.

Each was charged with three counts of violating the Clean Water Act, which bars discharges of pollutants without a permit. Their company, Freedom Industries, and its owners and managers did not meet a reasonable standard of care to prevent spills, the indictment stated.

One of those indicted, Gary L. Southern, the company’s president, was also charged with wire fraud, making false statements under oath and bankruptcy fraud. Freedom declared bankruptcy days after the spill.

Actual prison time is at stake in these charges:

Besides Mr. Southern, of Marco Island, Fla., the indictment named three other owners and operators: Dennis P. Farrell, 58, of Charleston; William E. Tis, 56, of Verona, Pa.; and Charles E. Herzing, 63, of McMurray, Pa.

Two others were also charged: Robert J. Reynolds, 63, of Apex, N.C., and Michael E. Burdette, 63, of Dunbar, W.Va. Mr. Reynolds was Freedom’s environmental consultant, and Mr. Burdette managed the tank farm. Mr. Herzing, Mr. Tis and Mr. Farrell sold the tank farm to a Pennsylvania company about a month before the accident.

All six were charged with the negligent discharge of a pollutant, negligent discharge of a refuse matter and violating an environmental permit. The violations carry a maximum penalty of three years in prison, according to a statement issued by the United States attorney for the Southern District of West Virginia.

Southern, on the other hand, faces up to 68 years when the additional ten charges he is facing are factored in.

This is a truly remarkable development. Recall that John Galt got away with killing Texans in the massive fertilizer plant explosion in West, Texas that caused over $100 million in property damage in addition to killing 15 and injuring over 200. That investigation was stymied at almost every turn, and no criminal charges were ever filed unless you count the strange prosecution of one of the first responders for possession of homemade bomb-making materials.

But recall that this is Eric Holder’s “Justice” Department that we are talking about here, so it is worth drilling down below the headlines. If we move to more local reporting on the charges, we find typical Holder behavior when it comes to how the company is being treated:

Also, U.S. Attorney Booth Goodwin charged Freedom Industries, the bankrupt company, with the same three counts of criminal water pollution violations. The company was charged through a document called an information, rather than an indictment, a move that usually indicates the defendant has reached a plea deal with prosecutors.

Mark Welch, Freedom’s chief restructuring officer, confirmed that the company had entered into a plea agreement with federal authorities and said the move was aimed partly at limiting the possible fines and criminal defense costs if the company were to be indicted. Welch, in a prepared statement, said the plea agreement also stipulates that the U.S. Attorney’s Office will not seek restitution from Freedom for victims of the company’s crimes, because of the company’s ongoing bankruptcy proceeding.

“This will permit Freedom to focus its time and limited resources on its environmental cleanup obligations and addressing the claims of its creditors,” Welch said.

In the world of Eric Holder (and John Galt), any claims by creditors who helped Freedom Industries to contaminate the Elk River have higher standing than any mere citizen who was harmed by Freedom.

13 replies
  1. bloopie2 says:

    Under bankruptcy law, the contractual claims of business creditors have exactly the same priority as the claims of those who are injured by the tortious conduct of the company that led to its bankruptcy. Of course, the injured parties would need to prove up their claims, as opposed to simply waving a piece of paper at the court, but that should be easy. I can understand leaving some money in the till for environmental cleanup obligations, but I can’t understand putting “the claims of its creditors” ahead of the claims of the victims.

    So it’s true that the statement quoted sounds despicable. On the other hand, if you would put 300,000 victims in as creditors, how many dollars would each one get from the pot? Ten bucks? Twenty? What would be the administrative cost of such work? And how much will those “creditors” be getting? It’s not stated; I doubt that they will be fully compensated. Also, every penny of capital in that company will be taken, and its managers and officers will be facing jail time. What else does one want to do, that CAN be done, to get more compensation for the victims? In truth, there is no way to adequately compensate them. Is there?

    This is certainly a PR blunder by Mr. Welch; he should have said more, as above. But he can’t make money appear from nowhere.

    • Jim White says:

      At least in the case of Gary Southern, around $7 million of his assets have been seized as part of the proceedings. I take strong objection to the current structure of corporate bankruptcy laws that ease the route to abandon the Freedom Industries corporate shell. If this follows the usual route, we’ll see many of the same backers involved in a “new” operation essentially identical in what it does but now magically shielded from paying out.
      Yes, the sheer number of potential victims seeking restitution is huge, but that doesn’t mean the effort should be abandoned.
      My bitterness comes from knowing that it is very likely that many of the same corporate backers will continue making outrageous amounts of money in the same industry with little to no impact on their bottom lines from this tragedy. It’s just the way business in the US operates in privatizing profits and socializing losses.

      • bloopie2 says:

        “My bitterness comes from knowing that it is very likely that many of the same corporate backers will continue making outrageous amounts of money in the same industry with little to no impact on their bottom lines from this tragedy. It’s just the way business in the US operates in privatizing profits and socializing losses.”

        Agreed. But. The point of a corporation is to limit the backer’s personal liability for the misdeeds of the corporation. (In return for that benefit, there are corresponding detriments, such as double taxation of corporate profits that are doled out as dividends, etc.) I, for one, would never invest in any company that had such huge potential exposure for innocent victims’ losses, if I knew that my personal wealth (hah) was on the line and was subject to circumstances basically out of my control. I believe most people would not. So, many things (companies) simply would not happen. Now, one might say that companies like Freedom shouldn’t exist, and that’s fine to say, but there are likely many good companies that wouldn’t exist, either. It’s a tough situation – if you want to have some “corporate backers” to fund your business, you will only get them if they can be let off the hook down the road.

        The underlying issue is that there is not enough money to compensate all the victims for this widespread disaster. If the only way to get more is to have backers put their own wealth on the line, then that’s just not going to happen. To me, what really ought to be done is to raise taxes a bunch, hire more inspectors, put some teeth into the environmental regulations, and force better operating conditions for these companies. Prevent the disaster in the first place. Kind of like Mr. Goodwrench – “You can pay me now, or you can pay me later.” Of course, that will likely not happen in America – ever.

    • Don Bacon says:

      Your focus on monetary aspects, compensation, is misdirected. When people are harmed, justice primarily requires punishment of the parties doing the harming. That’s what prisons are for.
      But of course that probably won’t happen in a country where justice is severely limited to those without power, and when money is made the primary focus.

  2. bevin says:

    The other party which appears to have got off scot free is the government. Clearly the regulations and the enforcement authorities were inadequate or negligent.
    Charging the cost of clean up to the government and using the company’s entire resources to compensate the obvious victims ought to alert voters to the price-in the form of tax increases- of electing the Ayn Rand Fan Club to government

  3. bloopie2 says:

    Hey, I’m stupid; help me out. In the Jeffrey Sterling trial, the talk is about what the Feds will ask James Risen (the reporter). Doesn’t Sterling, himself, have the right to call Risen and examine him? If so, what’s the difference? (Excuse my ignorance.)

  4. scribe says:

    Lest we forget.
    A few years back, during the piece-by-piece demolition of the Deutsche Bank tower in downtown Manhattan, irreparably damaged on 9/11, there was a fire in which a couple of NYC firefighters were killed fighting it. The reasons? (A) the remains of the building had been converted into a rabbit warren (or rat’s nest, take your pick) of compartments, not up to code by any standard and they probably got lost in there. (B) the lead contractor on the demo job had allowed the standpipe to be disconnected such that there was no water to the fire floor.
    The demo contracting company’s name? John Galt Corp.

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