Charges Expected for Freedom Industries President After Spill

By JONATHAN MATTISE | December 11, 2014

A West Virginia executive faces charges of lying to protect his personal wealth from lawsuits after his company spilled chemicals into 300,000 people’s water supply in January, according to a criminal complaint Monday.

The complaint unsealed Monday in U.S. District Court in Charleston charges Freedom Industries President Gary Southern with bankruptcy fraud, wire fraud and lying under oath. If convicted of all the charges, he faces up to 30 years in prison.

In a sworn affidavit, FBI Special Agent James F. Lafferty II testified that Southern downplayed his role with Freedom on the stand in U.S. Bankruptcy Court in Charleston multiple times. Lafferty says he made similar claims to federal workplace safety regulators.

The filing states Southern is trying to protect his net worth of at least $7.7 million from dozens of lawsuits already filed over the spill and any potential new ones creditors may introduce. Many businesses sued Freedom, Southern, the regional water company and other related parties because a tap-water ban shuttered their operations for days.

“They are either outright lies, or are, at the very least, misleading,” Lafferty stated in the document. “All of the statements indicate or suggest an effort to defect blame from Southern for the discharge of (the chemical) MCHM into the Elk River, which resulted in the denial of water to thousands of people and businesses, for most uses, for several days.”

The affidavit states Southern started May 2009 as chief operating officer, and was on the board of directors from March 2010 to October 2013. He has a “substantial motive” to avoid being linked to Freedom prior to the company’s Dec. 6, 2013 purchase by Chemstream Holdings Inc., the filing states.

In bankruptcy court, Southern described his role before the purchase as a “part-time, financial type consultant to help the owners of that business get their finances and systems kind of back on track.”

He said he was involved only “superficially” in Chemstream’s purchase of Freedom. He also told a committee of creditors, under oath, that he was not part of the Freedom organization before the acquisition, the affidavit states.

An attorney for Southern did not return a phone message for comment early Tuesday.

On Jan. 9, a tank at Freedom Industries in Charleston leaked little-known coal-cleaning chemicals into the Elk River, about a mile and a half upstream from a water treatment plant for nine counties. Freedom filed for bankruptcy eight days later.

The affidavit says Southern helped negotiate how much money would be placed in an escrow account for repairs at that facility.

It says Southern was fully aware of the lawsuits facing him, in addition to FBI and Environmental Protection Agency investigations.

The affidavit also cites an April court filing by Southern’s attorney that attempts to deflect blame, claiming “unfounded allegations and ceaseless vilification of him for an incident that occurred a mere 6 working days after he became the President of the Debtor, for which he bears no fault.”

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