{"id":75267,"date":"2016-06-20T13:00:07","date_gmt":"2016-06-20T12:00:07","guid":{"rendered":"https:\/\/www.transcend.org\/tms\/?p=75267"},"modified":"2016-06-20T12:59:17","modified_gmt":"2016-06-20T11:59:17","slug":"dupont-may-dodge-toxic-lawsuits-by-pulling-a-disappearing-act","status":"publish","type":"post","link":"https:\/\/www.transcend.org\/tms\/2016\/06\/dupont-may-dodge-toxic-lawsuits-by-pulling-a-disappearing-act\/","title":{"rendered":"DuPont May Dodge Toxic Lawsuits by Pulling a Disappearing Act"},"content":{"rendered":"

\"dupont<\/a><\/p>\n

15 Jun 2016 – <\/em>Sometime back in the early 1980s \u2014 Craig Skaggs can\u2019t recall the exact year \u2014 a DuPont executive vice president ordered a thorough review of the company\u2019s waste sites. A new hire named Martha Rees was given the job of compiling a list of all the places the company had manufactured, used, and dumped chemicals. \u201cShe was this young attorney that had been assigned this grunt work, really,\u201d said Skaggs, who worked in government affairs for DuPont from 1974 until 2001. \u201cAnd she\u2019d come to my office frequently.\u201d<\/p>\n

It was a different era back when Rees started writing what would become known as \u201cthe Rees Report.\u201d Love Canal, the environmental disaster in Niagara Falls, New York, in which a school was built on top of a toxic dump, had awakened Americans to the idea that industrial chemicals might be dangerous. Judging from Rees\u2019s assignment, DuPont, which jointly owned a company that played a bit role in the Love Canal disaster, seems to have taken notice, too.<\/p>\n

But appreciation of the extent of the harm posed by DuPont\u2019s chemical plants dawned slowly, according to Skaggs. Back when the project began \u2014 and quickly expanded from a memo to a report to a \u201cwhole filing system\u201d \u2014 the dangers of\u00a0environmental waste were still remote and abstract enough for at least some at the company to joke about. \u201cWe used to call it a barrel of di-double-do-bad,\u201d Skaggs said of the waste, which he recalls as being subject to the out-of-sight, out-of-mind treatment. \u201cIt was, take it to the dump, just dump it behind the building.\u201d<\/p>\n

Tracking the contents of all these barrels, pits, dumps, leaks, landfills, spills, and waste streams over time was a monumental task. Even back in the 1980s, the company, which was founded in 1802, had an environmental trail that defied cataloguing. \u201cThere were waste sites from the \u201950s and \u201940s,\u201d said Skaggs, who remembers there being 113 plants at the time \u2014 and the waste sites as being far more numerous. \u201cWaste would be hauled off in drums and taken to these sites and buried. And often, these sites were owned by other people.\u201d<\/p>\n

Rees was meticulous, combing through legal files within the company, interviewing employees who might know about older waste sites, and researching property records for evidence of the company\u2019s disposal records over the years, according to Skaggs. \u201cIt was a huge thing,\u201d he said, admiringly. \u201cShe did a great job.\u201d<\/p>\n

Martha Rees, who according to her LinkedIn profile retired from the company in 2015, did not return repeated calls inviting her to participate in this article. In response to inquiries about the Rees Report, DuPont spokesperson Daniel Turner wrote in an email, \u201cIt is hard to comment on the recollections of a former DuPont employee only to say that the employee may be mistaken.\u201d<\/p>\n

\"Source:<\/a>

Source: SEC filings, YCharts as of Dec. 31, 2015.
Graphic: The Intercept<\/p><\/div>\n

More than 30 years later, the question of how many waste and cleanup sites the company created in its more than two centuries of operation has taken on new urgency. Early this month, a trial got underway in Ohio over the industrial chemical PFOA (also known as C8). The trial is the fourth<\/a> of six bellwether personal injury cases against DuPont stemming from a massive class-action lawsuit<\/a>.<\/p>\n

Last July, DuPont spun off its \u201cperformance chemicals\u201d division, forming a new company known as Chemours, along with responsibility for a large portion\u00a0of its environmental liabilities, including litigation over PFOA. Then, in December, DuPont announced plans to merge what was left of its company with another chemical giant, Dow, and to divide the resulting corporate colossus into three separate entities.<\/p>\n

Together, the moves leave those struggling with DuPont\u2019s environmental legacy with lots of questions. So even as they\u2019re litigating the case of David Freeman, an Ohio man who developed testicular cancer after drinking water contaminated with PFOA, attorneys have also been asking the court to compel DuPont to demonstrate its ability to cover any awards to Freeman and other plaintiffs.<\/p>\n

In particular, they want to know \u201cwhere the liabilities and obligations of DuPont will fall\u201d if the merger takes place. In their most recent legal brief in what is known as the Leach case, submitted on May 11 to Federal Judge Edmund Sargus, lawyers reiterated fears that the proposed Dow-DuPont merger \u201cmay be an attempt to extinguish DuPont\u2019s liability\u201d for claims related to PFOA<\/a>. \u201cDuPont reaped hundreds of millions of dollars in profits from the manufacture of C-8 at its Washington Works plant and is now taking the position that not one Leach class member is entitled to compensation for injuries linked to their exposure to C-8.\u201d<\/p>\n

In its own brief, filed on May 4, DuPont said there had been no decision yet as to how the emerging companies will handle the costs in the PFOA cases and called the plaintiffs\u2019 request for documents premature as well as \u201cimproper and intrusive.\u201d DuPont\u2019s lawyers also said that the plaintiffs\u2019 accusations that the company was dodging its responsibilities were \u201cmerely speculative.\u201d<\/p>\n

Those awaiting their day in court said they were worried not just that DuPont would\u00a0try to duck out of its financial responsibilities, but that the company might disappear entirely. While DuPont has repeatedly promised that it will cover its liabilities, plaintiffs\u2019 lawyers responded that those assurances are meaningless \u201cif DuPont fails to exist, which is likely after the impending merger.\u201d<\/p>\n

\u201cI\u2019m afraid DuPont will vanish,\u201d said Rob Bilott, the attorney who oversees the class-action suit.<\/p>\n

A Financially Shaky\u00a0Spinoff<\/strong><\/p>\n

The company DuPont spun off in July, Chemours \u2014\u00a0meant to rhyme with \u201cNemours,\u201d as in DuPont\u2019s founder<\/a>, \u00c9leuth\u00e8re Ir\u00e9n\u00e9e\u00a0du Pont de Nemours \u2014 assumed a heavy load from its corporate parent. The assets it inherited \u2014 including 37 active chemical plants and DuPont\u2019s fluorochemical division \u2014 accounted for just 19 percent of DuPont\u2019s $35 billion in sales in 2014. Chemours also assumed 62 percent<\/a> of DuPont\u2019s environmental liabilities, including 174 polluted sites<\/a>.<\/p>\n

As part of the agreement, Chemours assumed legal responsibility for DuPont\u2019s\u00a0costs\u00a0in \u201cproduct liability, intellectual property, commercial, environmental and anti-trust lawsuits,\u201d according to the filings. But some fear that Chemours will be unable to fulfill those obligations. Jeffrey Dugas, a spokesperson for Keep Your Promises DuPont<\/a>, which represents people living near DuPont\u2019s West Virginia plant who were exposed to PFOA, saw the spinoff as a deliberate dodge. \u201cIt looked to us like another way for DuPont to avoid paying the people of the mid-Ohio valley what they were owed,\u201d said Dugas. \u201cAll of a sudden these massive liabilities are being transferred to a poorly capitalized company.\u201d<\/p>\n

Chemours\u2019s first year has been financially shaky<\/a>. Since opening at $21.00 a share a year ago, the company\u2019s stock has fallen to $8.34. While DuPont has promised to cover some of the new company\u2019s liabilities if necessary, that promise won\u2019t necessarily cover all the company\u2019s costs, as Chemours spelled out in its February SEC filings. \u201cDuPont has agreed to indemnify us for such liabilities, but such indemnity from DuPont may not be sufficient to protect us against the full amount of such liabilities, and DuPont may not be able to fully satisfy its indemnification obligations.\u201d<\/p>\n

One financial website<\/a> recently put Chemours\u2019s chances of bankruptcy at 50 percent. Another, Citron Research<\/a>, went further, concluding in early June that Chemours is \u201ca bankruptcy waiting to happen,\u201d and likening DuPont\u2019s \u201cdump-off\u201d of liabilities to its treatment of PFOA itself. \u201cWhile chemical giant DuPont has spent 60 years dumping waste around its facilities, they have spent the past 11 months dumping this \u2018toxic spinoff\u2019 on Wall Street.\u201d<\/p>\n

With Chemours\u2019s creation, DuPont was \u201cdiabolically using the legal system to avoid liability,\u201d according to Citron, which spelled out the gambit this way: \u201cCreate a bad entity that is designed to fail, so the good entity can be spared the reputational and liability damage.\u201d The financial website predicted that it will take Chemours 18 months to go bankrupt, \u201cjust long enough for the new Dow\/DuPont to split into three companies, and create separate entities that will all fight for indemnification from this financial toxic dumpsite of liabilities.\u201d<\/p>\n

Citron, which has been publishing for 15 years, concluded that the spinoff amounted to \u201ccomplete securities fraud\u201d and that Chemours is \u201cthe most morally and financially bankrupt company that we have ever witnessed.\u201d<\/p>\n

A February announcement<\/a> that DuPont would also indemnify the individual members of Chemours\u2019s board, ensuring that none of them faced personal financial consequences, was no doubt a relief to the executives, including CEO Mark Vergnano, whose current salary is about $1.33 million before stock options. But it rattled some close to the PFOA litigation. \u201cIt\u2019s not right that individuals in a corporation can make decisions that endanger millions of people and then walk away,\u201d said Paul Brooks, a West Virginia doctor who helped tally the health consequences of the chemical.<\/p>\n

In an email, DuPont\u2019s Daniel Turner wrote, \u201cDuPont remains committed to continuing to fulfill all of its environmental and legal obligations in accordance with existing local, state and federal regulatory guidelines. The indemnification provision we agreed to with Chemours does not take away any valid legal claims that plaintiffs have against DuPont for pre-spin operations or the right to collect from DuPont if DuPont is found liable in any related action.\u201d<\/p>\n

The statement also said that \u201cunder state and federal law, most, if not all of the Chemours active environmental remediation responsibilities are guaranteed by surety bonds or other forms of insurance that name the government as the beneficiary. Should Chemours fail to perform, the government may step in and use these funds to complete any required remediation.\u201d<\/p>\n

Chemours declined a request to comment for this story.<\/p>\n

A Coming Together of Equals<\/strong><\/p>\n

If all goes according to plan, a unified DowDuPont could emerge as soon as October. Though the mega-company is anticipated to have a combined market capitalization of $130 billion, it may be hard for plaintiffs to access any of that money.<\/p>\n

\u201cMoving assets around can make it more difficult to recover,\u201d said Lawrence A. Hamermesh, a professor of corporate law at Delaware Law School. The merged entity assumes the debts of the original companies that formed it, said Hamermesh. And depending how Dow DuPont chose to organize those debts, \u201cit could get complicated.\u201d<\/p>\n

It could become more complicated still after DowDuPont splits into three separate companies \u2014 one for agricultural chemicals; another for \u201cspecialty products\u201d such as Kevlar, Tyvek, and food additives; and a third that will specialize in chemicals used in cars, food packaging, and pharmaceuticals.<\/p>\n

\u201cWith all these spinoffs and individual companies, it\u2019s possible that the company that carries through all of this could end up having very few assets,\u201d said Hamermesh.<\/p>\n

It\u2019s possible, too, that Chemours\u2019s financial woes could derail the planned merger altogether, according to Donald Baker<\/a>, an anti-trust attorney hired by Keep Your Promises DuPont. Since the merger has been envisioned as a coming together of equals<\/a>, in which the shareholders of each company would take a 50 percent stake in the combined company, a financial failure at Chemours could alter that equation. \u201cIf Chemours went under, then some of the assignments to Chemours might be set aside as fraudulent for purposes of bankruptcy law,\u201d said Baker. If that happened, \u201cthe Dow shareholders might feel that giving DuPont 50 percent or close of the combined company wasn\u2019t worth it because DuPont was responsible for this big turd.\u201d<\/p>\n

Significant Environmental Liabilities<\/strong><\/p>\n

The exact size of that turd is subject to both interpretation and change. Last July, DuPont counted 171 contaminated Chemours sites; Chemours has since upped the number of sites to 174. Citing \u201cadverse\u201d circumstances,\u00a0Chemours also acknowledged that the bill for its environmental burdens might be $611 million higher than its first estimate\u00a0<\/strong>of $290 million.<\/p>\n

One reason for the upward revision could be the ballooning exposure of PFOA litigation. In October, DuPont was found liable<\/a> for $1.6 million in the first of more than 3,500 personal injury claims relating to the chemical. In February, the company settled<\/a> another PFOA case for an undisclosed amount. And starting in May 2017, 40 more claims<\/a> over DuPont\u2019s PFOA liability are slated for trial.<\/p>\n

The EPA\u2019s recently revised health advisory<\/a>, which lowered the amount of PFOA acceptable in drinking water from .4 to .07 parts per billion, may also affect the calculations. According to Chemours\u2019s latest SEC filings, three of the sites where it used or made PFOA are subject to the new lower levels. And \u201cEPA has determined that additional public water systems and private residential wells around\u201d two of those sites may have to be filtered.<\/p>\n

Among the other legal burdens assumed by Chemours is the cost of litigation over benzene, a carcinogen contained in some of DuPont\u2019s paints. In December, a Texas jury awarded $8.4 million<\/a> to a painter who developed leukemia after using the paints for years. And at least 27 more benzene cases<\/a>, expected to cost the company between $200 and $300 million, were pending as of December, according to Chemours\u2019 SEC filings. The spinoff company also faces some 2,180 upcoming suits over asbestos<\/a>; 83 pending cases over silica, which also causes a deadly lung disease when inhaled; and four over butadiene, a known carcinogen<\/a> that DuPont used to make neoprene<\/a>.<\/p>\n

Chemours is also obligated to clean up Pompton Lakes, New Jersey,<\/a> where DuPont manufactured explosives from 1902 until 1994<\/a>, and where\u00a0lead salts, mercury, volatile organic compounds, explosive powders, chlorinated solvents, and detonated blasting caps still contaminate groundwater and soil. Chemours\u2019 SEC filings estimated that the remediation, which began in 1985, may cost as much as $116 million to finish. And some residents fear that number is too low. Lisa Riggiola, a former Pompton Lakes city council member, said that for years, she and others in the community have been asking for a full inventory of the chemicals DuPont used and dumped in their hometown so they can understand the full extent of the contamination.<\/p>\n

\u201cWe\u2019ve never we seen it,\u201d said Riggiola. \u201cWe still don\u2019t know everything we need to know about the site.\u201d<\/p>\n

No doubt a detailed report on DuPont\u2019s historical production sites would be helpful in determining the true scope of DuPont\u2019s and Chemours\u2019s liabilities. But Dupont\u2019s Turner says the \u201cRees Report\u201d that Skaggs remembers is nowhere to be found. \u201cTo the best of our knowledge we have found no evidence for a \u2018Rees Report\u2019 regarding \u2018waste sites,\u2019\u201d he wrote in an email.<\/p>\n

For his part, Craig Skaggs is confident his recollection of the report Martha Rees began compiling 30 years ago is accurate. \u201cI\u2019m sure it still exists somewhere,\u201d said Skaggs. \u201cAnd I\u2019m sure it\u2019s retained by the legal department.\u201d<\/p>\n

____________________________________<\/p>\n

Sharon Lerner<\/a> – \u2709sharon.lerner@theintercept.com<\/a><\/em><\/p>\n

Go to Original \u2013 theintercept.com<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

Deceit, duplicity, power play. First DuPont spun off much of its environmental liability into a new company known as Chemours. Now DuPont plans to merge with Dow. <\/p>\n","protected":false},"author":4,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[55],"tags":[],"class_list":["post-75267","post","type-post","status-publish","format-standard","hentry","category-capitalism"],"_links":{"self":[{"href":"https:\/\/www.transcend.org\/tms\/wp-json\/wp\/v2\/posts\/75267","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.transcend.org\/tms\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.transcend.org\/tms\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.transcend.org\/tms\/wp-json\/wp\/v2\/users\/4"}],"replies":[{"embeddable":true,"href":"https:\/\/www.transcend.org\/tms\/wp-json\/wp\/v2\/comments?post=75267"}],"version-history":[{"count":0,"href":"https:\/\/www.transcend.org\/tms\/wp-json\/wp\/v2\/posts\/75267\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.transcend.org\/tms\/wp-json\/wp\/v2\/media?parent=75267"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.transcend.org\/tms\/wp-json\/wp\/v2\/categories?post=75267"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.transcend.org\/tms\/wp-json\/wp\/v2\/tags?post=75267"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}