Jan. 13 (Bloomberg) -- A West Virginia chemical maker was sued along with a local water company over a spill into the Elk River in the state capital, Charleston, that left businesses and residents without tap water for days.
Freedom Industries Inc. and West Virginia-American Water Co. were accused in the suit of negligence and causing a public nuisance. The utility failed to deal promptly with the emergency and had no procedures in place to prevent chemicals from getting into the water system, according to a complaint filed Jan. 10 in Kanawha County Circuit Court in Charleston that was e-mailed to Bloomberg News.
The plaintiff, Scott Miller, said he suffered economic damage as the Kanawha County health department ordered closures of businesses in and around Charleston, including his Bar 101 and Ichiban Restaurant. At least nine counties were affected by the spill, according to the suit.
Cathy Gatson, circuit clerk, said the Miller complaint, filed by Hill Peterson Carper Bee & Deitzler PLLC in Charleston, was one of 18 filed in court as of today.
Freedom Industries, formed in 1986, supplies specialty chemicals to the steel, cement and coal-mining industries, according to its website. The closely held company, whose chemicals-storage plant polluted the Elk River, compromising water for about 300,000 people and sending more than 100 to the hospital, completed a four-way merger nine days before the leak was discovered.
In 2005, the company sued a founder of the company, Carl Lemley Kennedy II, for embezzlement after he pleaded guilty to tax evasion in 2004 and admitted to using corporate funds for his own benefit.
The company demanded money from Kennedy, who by then had filed for bankruptcy, to help pay more than $1 million in unpaid taxes sought by the Internal Revenue Service and the state, according to the lawsuit filed in federal court in Charleston. It also claimed more than $2 million from Kennedy’s bankrupt estate.
Kennedy, in turn, claimed Freedom Industries owed him for most of a 50 percent stake that he allegedly transferred to other shareholders and was now estate property. Freedom later settled the case with the bankruptcy trustee, agreeing to pay the estate $800,000 to get back Kennedy’s shares.
Kennedy was sentenced to 40 months in prison in February 2006, after pleading guilty to two counts of tax evasion and failure to collect and pay taxes. Entrusted with collecting employees’ federal tax and insurance payments, he failed to pay the U.S. more than $1 million owed between 2001 and 2003, while evading about $510,000 of personal taxes over five years, according to the charges.
He tried to cover his tracks by falsifying W-2 forms and company records, the U.S. said. His sentence was later reduced to 22 months.
Dennis Farrell, Freedom’s president, and Laura Jordan, a spokeswoman for West Virginia-American, didn’t immediately respond to e-mails seeking comment on the lawsuits over the spill.
James Peterson, a lawyer for Miller, said in an e-mail that he hadn’t ascertained the spill’s cause and his “working hypothesis” is that Freedom Industries didn’t adequately supervise and maintain its facilities.
The case is Miller v. Freedom Industries Inc., West Virginia-American Water Co., 14-C-47, Circuit Court of Kanawha County, West Virginia (Charleston).
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