Freedom Industries pleads guilty to pollution charges in West Virginia chemical spill case

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CHARLESTON, West Virginia — A now-bankrupt chemical company pleaded guilty Monday to three pollution charges related to last year's spill that contaminated a West Virginia river.

Mark Welch, chief restructuring officer of Freedom Industries, entered the plea on behalf of the company in federal court to negligent discharge of a pollutant and unlawful discharge of refuse matter, both misdemeanors, and violating a permit condition under the Clean Water Act, a felony.

Thousands of gallons of a coal-cleaning agent from Freedom Industries in Charleston spilled into the Elk River and went into West Virginia American Water's intake 2 miles downstream on Jan. 9, 2014. It prompted a tap water ban for 300,000 residents in nine counties for up to 10 days while the water company's system was flushed out.

Freedom Industries, which filed for bankruptcy eight days after the spill, faces a maximum $900,000 fine. Sentencing was set for June 29.

"Extreme fines would be very difficult for the estate," Welch told U.S. District Judge Thomas Johnston. "I have limited resources."

In ordering a presentencing report, Johnston said, "We'll find out how much money Freedom Industries has."

An FBI affidavit says Freedom knew about critical flaws at its Charleston plant but never dealt with them. Federal investigators have said holes in a corroded tank's floor and roof likely helped cause the spill.

Prosecutors have said the tank conditions "put an entire population needlessly at risk."

In September a federal bankruptcy judge approved a $2.9 million settlement between the company and businesses and residents under which a panel would choose public interest projects that would benefit those whose tap water was contaminated. The settlement would rely on insurance proceeds from Freedom Industries.

Former Freedom owners William Tis and Charles Herzing and two lower-level employees pleaded guilty to a pollution charge last week and will be sentenced in June.

Another former Freedom owner, Dennis Farrell, and former President Gary Southern face trial later this year on charges related to the spill. In addition, Southern faces charges related to Freedom's bankruptcy.

Tis, Herzing and Farrell owned Freedom until December 2013, when they sold it to Pennsylvania-based Chemstream Holdings for $20 million. Southern became president afterward, but he was in charge of Freedom's day-to-day operations for years beforehand, his FBI affidavit states.

Southern is accused of scheming to defraud Freedom's creditors and plaintiffs who sued the company and him after the spill. Prosecutors claim he attempted to protect some of his assets from possible verdicts and judgments.

One count, fraud by interstate commerce carrier, alleges that Southern sent a $6.5 million check from a personal bank account around Feb. 7, 2014, to an insurance company to be deposited in an annuity.

Southern also previously was charged with bankruptcy fraud, wire fraud and lying in oath in relation to the bankruptcy case.

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