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Not Too Big to Jail: Freedom Industries Executives Sentenced for Environmental Crimes

Posted on March 16th, 2016 by in Chemical Manufacturing Excellence

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Two years ago, on January 9, 2014, Freedom Industries spilled almost 10,000 gallons of 4-methylcyclohexanemethanol (MCHM) into the Elk River in West Virginia, resulting in a “DO NOT USE” order from the water utility that deprived about 300,000 people—15% of the population of West Virginia—of drinking water for almost two weeks. Trial and sentencing have just concluded. The company, now bankrupt, was fined $900,000 and put on probation for five years. The judge called the penalties “symbolic” because the incident put the company out of business. In addition, six officials with the company were each individually fined and sentenced to three years of probation, or in the case of the two top officials, to a month each in a federal penitentiary.

Personal Fines and Prison Time

The fate of Gary Southern, president and co-owner of Freedom Industries, was probably sealed on the day after the spill at a now infamous press conference where he drank bottled water while complaining about what a hard day he was having. He and Dennis Farrell, another co-owner and previous president of Freedom Industries were both sentenced last month to one month in a federal penitentiary. Some will argue that they got off easy. Southern, Farrell, and two other owners, William Tis and Charles Herzing, were each fined $20,000. Tis and Herzing were sentenced to three years probation instead of prison time.

More compelling, at least to me, is the fate of the two employees who were not owners. Robert Reynolds, an environmental consultant who worked for Freedom Industries, was fined $10,000 and sentenced to three years probation. Michael Burdette, plant manager, was fined $2,500 and sentenced to three years probation. Both knew that the containment dike around the tank farm was inadequate and Burdette was able to show during his trial that he had requested that the dike wall be repaired. The company denied his request for financial reasons. Reynolds and Burdette are now unemployed. How successful either will be at finding new work as environmental consultant or chemical plant manager? They didn’t go to jail, but I imagine that their careers are over.

How bad was it?

What were the health effects[1] when Liberty Industries released 10,000 lbs of MCHM to the Elk River? Did anyone die? No. Were there permanently disabling injuries? No. Were there hospitalizations? Yes, there were 13 precautionary hospitalizations of people who had been exposed to MCHM and already had chronic illnesses such as kidney, liver, or lung disease. There were also 356 people who were treated and released for nausea, rash, vomiting, diarrhea and other symptoms associated with MCHM exposure and also associated with other mild clinical illness such as colds or flu or other viral infections one might encounter in January in West Virginia.

The spill into the Elk River was not a surprise, not a sudden, catastrophic failure that no one could have expected. The Charleston Gazette-Mail[2] quoted Burdette, who is trained as an engineer, as saying he “did not fully appreciate the environmental compliance and regulatory issues.” Yet it is clear from state and federal investigations that Freedom Industries knew of the potential for a catastrophic incident, and had known for years.[3] It appears that the management and owners at Freedom Industries were crossing their fingers and counting on luck to keep them and the public out of harm’s way, on the basis that ‘If we do have a spill, how bad would it be?’

With the certainty of hindsight, it is easy to see that Freedom Industries should have addressed the design and maintenance issues of its tank farm years before the spill. U.S. District Judge Thomas Johnston noted when sentencing Burdette that “The defendant did not have full control of the purse strings, but there is much he could have done.”

But decisions are not made with the certainty of hindsight. They are made hip-deep in uncertainty, in a milieu of competing priorities and finite resources.

Managing Certainty Is Easy

What’s the lesson? What can you do, not looking back from the wreckage of a disaster, but looking forward to the future, knowing what you know now? Or more to the point, not knowing what you don’t know now? Even the most reckless, irresponsible, negligent company will refuse to follow a course of action that they know with certainty will result in disaster. Otherwise, they don’t stay in business. And even the most responsible, careful, safety-conscious company will go ahead and follow a course of action that they know with certainty will result in success. Otherwise, they don’t stay in business. It’s not what you do in the face of certainty that matters. That’s the same for everyone. It’s what you do in the face of uncertainty that matters.

The management and owners at Freedom Industries decided to go ahead and roll the dice. How bad was it? It put 13 people in the hospital, resulted in the medical treatment and release of another 356 people, and deprived 300,000 people of drinking water for almost two weeks. It also put the company out of business, resulted in two of the owners going to a federal penitentiary, and deprived every senior official in the company of his career. And many people think Freedom Industries got off easy.

When you, in a milieu of competing priorities and finite resources, are faced with a decision that will affect the safety of employees and the community, that has the potential to impact the environment, keep in mind the story of Freedom Industries. Although popular culture celebrates the risk-taker, society cares little for the entrepreneur when that risk imposes on it.

 


 

All opinions shared in this post are the author’s own.

[1] WVBPH and ATSDR. “Elk River Chemical Spill Health Effects: Findings of Emergency Department Record Review,” Collaborative Investigation, West Virginia Bureau for Public Health and the Agency for Toxic Substances Disease Registry, Apr 2014. http://www.dhhr.wv.gov/News/chemical-spill/Documents/ElkRiverMedicalRecordSummary.pdf (accessed 07-Mar-2016).

[2] Ward Jr., K. “Freedom’s Burdette gets probation in spill case,” Charleston Gazette-Mail, 4-Feb-2016. http://www.wvgazettemail.com/news/20160204/freedoms-burdette-gets-probation-in-spill-case (accessed 07-Mar-2016).

[3] WVAGO, Elk River Chemical Spill Incident Report, Office of the West Virginia Attorney General, 08-Jan-2015. http://www.ago.wv.gov/Documents/010815-ElkRiverChemicalSpill.PDF (accessed 07-Mar-2016)

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