Company files for bankruptcy after W.Va. chemical spill

By JONATHAN MATTISE Associated Press Published:

CHARLESTON, W.Va. -- The company blamed for a chemical spill that left 300,000 West Virginians without safe drinking water filed for bankruptcy Friday.

Freedom Industries Inc., facing at least 31 lawsuits and state and federal investigations after the Jan. 9 spill, filed a Chapter 11 petition with the U.S. Bankruptcy Court in the Southern District of West Virginia.

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 freeze 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.

The bankruptcy filing doesn't stall lawsuits against other parties targeted in the spill, said Washington D.C. attorney H. Jason Gold.

Some of the 31 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."

The water was tainted after a chemical used to clean coal leaked from a storage tank and then a containment area at a facility owned by Freedom Industries. The water ran into the Elk River, contaminating the state's largest water system.

The bankruptcy document says the leaky storage tank appears to have been pierced through its base by some sort of object. It also says a current theory for the hole is that a local water line that broke near the Charleston plant could have made the ground beneath the storage tank freeze in the cold days before the spill.

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 most residents.

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 proposed storage regulations and inspections 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.

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.

A spokeswoman for Gov. Earl Ray Tomblin did not immediately answer a phone call for comment.

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Associated Press writer John Raby in Charleston contributed to this report.

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