Freedom officers, creditors meet in bankruptcy court
CHARLESTON, W.Va. -- Officials with Freedom Industries met with the company's creditors in federal bankruptcy court on Tuesday and answered questions about the company's insurance coverage and assets and liabilities.
Freedom Industries, which contaminated the water of thousands of West Virginians with a chemical leak into the Elk River on Jan. 9, filed for Chapter 11 bankruptcy on Jan. 17. Chapter 11 allows a company to reorganize and continue operating, but during a hearing last week, Freedom's attorney said the company would soon shut down.
After the meeting with creditors, Freedom President Gary Southern said company officials were dedicated to cleaning up from the leak and trying to find other jobs for its employees.
"This has been an extremely traumatic event for everybody to deal with, particularly our employees," Southern said outside the Robert C. Byrd U.S. Courthouse in Charleston.
"We're absolutely committed to the people of the state of West Virginia in terms of our remediation of the facility and our employees, with whom we're working extremely hard to find them new positions for those that will be displaced as a result of the bankruptcy," Southern said. "That is the forefront of our focus and will continue to be so until we meet all of our obligations."
During the meeting Tuesday, Southern and the company's chief financial officer, Terry Cline, testified that chemicals had been removed from the property. In an agreement with the state Department of Environmental Protection, Freedom has agreed to dismantle its site on Barlow Drive on or before March 15.
There are about 240 unsecured creditors to whom Freedom owes money. Many of the unsecured creditors are those who filed lawsuits against the company before its bankruptcy filing. There are at least 30 lawsuits against Freedom.
U.S. Bankruptcy Judge Ronald G. Pearson said in a hearing last week "there's a serious limit on funding available."
The judge recommended that plaintiffs' lawyers and Freedom's lawyers work together to come up with a standardized claim form for people seeking damages from Freedom for things like lost wages and lost business, to try to preserve Freedom from excessive legal costs.
Shortly after that hearing Friday, Freedom began moving the lawsuits filed against it from state court to bankruptcy court.
Attorneys representing creditors wanted more information about the company's insurance coverage at Tuesday's hearing. A bankruptcy trustee appointed by the U.S. Department of Justice questioned financial documents the company produced last week.
Freedom Industries had $16 million in assets and $6 million in liabilities when it filed for bankruptcy last month, according to the financial documents.
Freedom's Etowah facility, where the leak occurred, is valued at about $977,000, Cline said. He said the property was purchased in 2002 with the tanks on it.
In the year before it filed for bankruptcy, Freedom Industries paid more than $6 million to its former owners and to companies affiliated with its current owners, court filings show. These payments to what bankruptcy law calls "insiders" will be closely examined by Freedom's creditors and could be ordered returned to the company if they're deemed improper.
Blackwater LLC, which also is listed as an affiliated company, took more than $1.1 million from Freedom in 2013. Southern testified Tuesday that Blackwater also employs him.
Southern also is president of Enviromine Inc., according to records on file with the West Virginia secretary of state. In 2013, Enviromine took more than $3.8 million from Freedom for "goods/services." Freedom still owes Enviromine more than $1 million in additional payments, filings show.
Reach Kate White at email@example.com or 304-348-1723.