Climate

FBI Files Charges Against President Of Company Behind West Virginia Chemical Spill

CREDIT: WCHS News/Screenshot

Gary Southern, president of Freedom Industries, takes a sip of water at a press conference on the chemical spill.

Gary Southern, president of Freedom Industries, takes a sip of water at a press conference on the chemical spill.

Gary Southern, president of Freedom Industries, takes a sip of water at a press conference on the chemical spill.

The former president of the company that contaminated drinking water for 300,000 West Virginians this past January has been arrested on criminal fraud charges, according to a Federal Bureau of Investigation complaint unsealed Monday.

Former Freedom Industries president Gary Southern was charged with bankruptcy fraud, wire fraud, and lying under oath during the company’s bankruptcy proceedings following the massive spill — a 10,000 gallon dump of a coal-cleaning chemical called crude MCHM into the Elk River. FBI Special Agent James F. Lafferty said in a sworn affidavit that Southern, in an attempt to protect his personal fortune of nearly $8 million and shield himself from lawsuits, developed a scheme to distance himself from the company and “deflect blame” to other parties.

“Shortly after the leak and discharge of MCHM into the Elk River was discovered on January 9, 2014, Southern engaged in a pattern of deceitful behavior, which included numerous false and/or fraudulent statements about his role at Freedom, his role in the sale of Freedom to Chemstream, and his knowledge about conditions at the Etowah Facility,” the affidavit read.

The background of the case involves the sale of Freedom Industries to a company called Chemstream Holdings, a sale that occurred just weeks before the spill. This was seemingly an unfortunate purchase, as the spill forced Freedom to declare bankruptcy.

Around the same time, the Environmental Protection Agency and the FBI began investigating the company and its bankruptcy to see if there had been any criminal violations of the Clean Water Act, specifically section 1319(c), which prohibits parties from negligently or knowingly introducing pollutants into publicly owned water systems.

Despite knowing that the investigation was taking place, Lafferty alleged that Southern began lying about his involvement with Freedom. Specifically, Southern testified under oath that he did not work for Freedom before the company was purchased by Chemstream in December 2013. Southern later walked that back, and admitted that he worked as a “part-time, financial type consultant” to the previous owners of Freedom before it was purchased by Chemstream.

But Southern was much more than a “part-time, financial type consultant” to Freedom, Lafferty alleged. In reality, Southern had been Freedom’s Chief Operating Officer since 2009, and served on Freedom’s board of directors from 2010 until 2013. Southern “possessed and exercised significant management authority,” Lafferty’s affidavit said, noting that Southern managed day-to-day business, hired and supervised employees, and authorized spending. Lafferty also alleged that Southern lied under oath about the role he played in Freedom’s purchase of Chemstream, trying to minimize is as “superficial” when he was actually heavily involved.

“[T]he statements and representations themselves are indicative of an intent to defraud,” Lafferty’s affidavit read. “They are either outright lies or are, at the very least, misleading.”

Southern’s alleged motivations for doing this were simple. “There is much at stake for Southern, as he possesses substantial assets,” the affidavit said, noting Southern’s $7.7 million personal fortune (Southern also lives in a $1.2 million, 4,133 square foot mansion in Marco Island, Florida, according to documents on the West Virginia Secretary of State’s office and Trulia). “Southern thus has a substantial motive to avoid being linked to Freedom before the purchase by Chemstream.”

Freedom, and Southern specifically, has been called out for appearing to dodge the problems that the historic spill caused. The day after the chemical spill was said to have begun, he attempted to excuse himself multiple times while being asked questions by reporters. He then took a sip of bottled water in front of the news cameras, an image that many called “brazen” considering his company was preventing others from that very luxury.

Southern was also scrutinized in March for asking for compensation while he worked during Freedom’s company bankruptcy. Southern said he had been working 12-16 hours every day and deserved to be paid. But local environmental leaders scoffed, saying he had been “out of the picture since day one of this crisis.”

“As a citizen that was impacted by the leak, I’m happy to see that he is going to face criminal charges,” said Karan Ireland, the development director at West Virginia Citizen Action Group. “What most of us believe is that [Freedom was] criminally negligent, and so for us there’s a sense of being vindicated.”

Ireland said the charges were important not just for those affected by the chemical spill, but for anyone in West Virginia who may have lost hope about justice for polluters. She noted the recent criminal indictment of Don Blankenship, the former West Virginia coal boss charged with responsibility for a mine explosion that killed 29 workers in 2010. That indictment was hailed by the Charleston Gazette as “momentous,” a representation “that coal miners dying in an unsafe mine is not allowed to pass simply as a cost of doing business.”

With Southern’s indictment, Ireland senses a changing of the tide.

“There’s something known as Appalachian fatalism,” she said. “I don’t know that I necessarily believe in it, but there is the belief that West Virginians in general are ground down by a lack of justice.”

“So for me,” she said, “it’s a great day when people are held accountable. This is something we can point to and say, when you’re vigilant, and outspoken, things can happen. There are people who are working to see that justice prevails.”