The Federal Bureau of Investigation has arrested Gary Southern, former president of the company responsible for contaminating the drinking water of 300,000 West Virginians earlier this year, on criminal fraud charges. According to a complaint unsealed on Monday, Southern was charged with bankruptcy fraud, wire fraud and lying under oath in hearings following the spill.
This January, up to 300,000 people were left without tap water after 10,000 gallons of a coal-cleaning chemical began leaking into the Elk River in Charleston, West Virginia, just upstream of the largest water treatment plant in the state. The leak sprung at a storage tank run by Southern's former company, Freedom Industries, which manufactures chemicals for coal and steel production. The chemical, called 4-Methylcyclohexane Methanol (MCHM), causes "severe burning in the throat, vomiting and skin blistering" if one comes into contact with it.
An investigation revealed a disturbing level of negligence: not only were the company's tanks full of holes (through which a steady stream of toxic liquid was flowing into the river), the leak had been noticed and sort-of fixed, with a cinder block and some absorbent powder.
In a sworn affidavit, FBI Special Agent James F. Lafferty said that Southern attempted to preserve his wealth and innocence by blaming others. "Shortly after the leak and discharge of MCHM into the Elk River was discovered on January 9, 2014," the affidavit reads, "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."
Just before the spill, Freedom Industries had been sold to Chemstream Holdings. Meanwhile, the Environmental Protection Agency and the FBI had started an investigation into the former company for any violations of the Clean Water Act. Under oath, Southern testified that during this period of time, he was not an employee of Freedom. He later admitted that he worked part-time as a consultant.
Think Progress' Emily Atkin reports:
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.”
Karan Ireland, development director at West Virginia Citizen Action Group, is pleased with the charges. "There's something known as Appalachian fatalism," she said in an interview with Think Progress. "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, it's a great day when people are held accountable."