U.S. Attorney Charges High School Teacher With Attempted Transfer Of Obscene Material And Receipt And Possession Of Child Pornography
Preet Bharara, the United States Attorney for the Southern District of New York (“SDNY”), Robert G. Dreher, the Acting Assistant Attorney General for the Justice Department’s Environment and Natural Resource Division (“ENRD”), Cynthia Giles, the Assistant Administrator for the Office of Enforcement and Compliance of the U.S. Environmental Protection Agency (“EPA”), and Judith Enck, Regional Administrator of the EPA’s Region 2, announced today that the United States Bankruptcy Court for the Southern District of New York has awarded between $5.1 billion and $14.1 billion against defendant Kerr-McGee Corporation and certain related defendant companies (“Kerr-McGee” or “New Kerr-McGee”), all of which are subsidiaries of the Anadarko Petroleum Corporation, in a fraudulent conveyance case brought by the United States and co-plaintiff Anadarko Litigation Trust (the “Trust”) in the bankruptcy of Tronox, Inc., and its subsidiaries (“Tronox”). The Court found that in 2005 the historic Kerr-McGee Corporation (“Old Kerr-McGee”) fraudulently conveyed assets to New Kerr-McGee to evade its debts, including its liability for environmental clean-up at toxic sites around the country. This is the largest award ever in a bankruptcy for governmental environmental claims and liabilities, and one of the largest environmental enforcement awards ever.
Manhattan U.S. Attorney Preet Bharara said: “The United States will not let polluters evade their environmental liabilities through a corporate shell game. For decades, the Old Kerr-McGee Corporation dumped toxic chemicals across the United States, and then it tried to dump its obligation to clean up this mess on an insolvent company. In its wake, Old Kerr McGee left a legacy of contamination in communities across the nation, which has affected homes, places of worship, and town centers. The Court’s decision means that Kerr-McGee will finally have to pay for its pollution, and will fund clean-up in contaminated communities across the nation.”
Acting Assistant Attorney General Robert G. Dreher said: “We are very pleased with this outcome, which will appropriately and fairly account for past pollution and replenish funds for tomorrow’s cleanups. This court decision also sends a clear message that polluters cannot simply walk away from a toxic legacy and leave federal, state, and tribal governments to pick up the tab. This ruling will keep the financial burden on the responsible party, and not allow it to be shifted to the American taxpayer.”
EPA Assistant Administrator Cynthia Giles said: “The Court’s decision makes a strong statement that companies should take responsibility for the toxic pollution they cause. Those that manipulate their assets and leave American taxpayers to foot the bill to clean up their mess will be held accountable. This is a huge win for public health and the environment, as proceeds from the decision will fund needed cleanups across America.”
EPA Regional Administrator Judith Enck said: “This legal victory illustrates EPA’s commitment to cleaning up toxic waste sites in communities and ensuring that polluters, not taxpayers, pay for the environmental remediation. This was a complex case and the outcome ensures that billions of dollars will be channeled to advance toxic cleanups.”
According to the complaints of the Government and the Trust and the written opinion of U.S. Bankruptcy Judge Allan L. Gropper:
Old Kerr-McGee operated numerous businesses, which included uranium mining, the processing of radioactive thorium, creosote wood treating, and manufacture of perchlorate, a component of rocket fuel. These operations left contamination across the nation, including radioactive uranium waste across the Navajo Nation; radioactive thorium in Chicago and West Chicago, Illinois; creosote waste in the Northeast, the Midwest, and the South; and perchlorate waste in Nevada.
In the years prior to 2005, Old Kerr-McGee concluded that the liabilities associated with this environmental contamination were a drag on its “crown jewel” business, the exploration and production of oil and gas. With the intent of evading these and other liabilities, Old Kerr-McGee created a new corporate entity – defendant New Kerr-McGee – and, through a series of corporate transactions in 2005 and 2006, transferred its valuable oil and gas exploration assets to the new company. The legacy environmental liabilities were left behind in the old company, which was re-named Tronox. As a result of these transactions, Tronox was rendered insolvent and unable to address its environmental and other liabilities. In 2009, Tronox went into bankruptcy.
The United States and the bankruptcy estate (now represented by the Trust) brought this lawsuit to require the defendants to repay the value of the assets fraudulently conveyed from Old Kerr-McGee.
In its decision, the Court found that Old Kerr-McGee transferred assets with the intent to hinder or delay creditors, including particularly environmental creditors, and also transferred those assets for less than their fair value, which left Tronox insolvent, unable to pay its debts when they came due, and undercapitalized. Among other things, the Court concluded that:
The Court concluded that the net proceeds of the fraudulent transfer were $14,459,000,000, and that, depending on a question of bankruptcy law still to be decided in further proceedings, will result in a damages award of between $5,150,490,000 and $14,166,148,000. The bankruptcy court will conduct further proceedings to determine the amount of damages within this range.
In 2011, in connection with Tronox’s Plan of Reorganization, the estate paid approximately $270 million to fund environmental response trusts created to own and clean-up contaminated property. Additionally, pursuant to the Plan of Reorganization and agreements signed at that time, approximately 88% of the recovery in this lawsuit, net of Trust expenses, will be distributed to the environmental trusts and to the federal, state, and local environmental creditors for environmental clean-up of contaminated sites around the nation.
As a result of these agreements, some of the key environmental recoveries for environmental claims and for clean-up of environmental sites are estimated to be the following:
Additional amounts will be paid for numerous other environmental claims and sites at issue in this case.
Mr. Bharara thanked the Trust, its trustee, and its counsel for their critical work on this case. Mr. Bharara also thanked the many federal, state, and tribal officials who worked tirelessly on this matter. The litigation of this case was assisted by EPA personnel from around the country; the U.S. Fish & Wildlife Service and Bureau of Land Management of the U.S. Department of the Interior; the National Oceanic and Atmospheric Administration of the U.S. Department of Commerce; the U.S. Nuclear Regulatory Commission; and the U.S. Forest Service of the U.S. Department of Agriculture, as well as numerous state governments and the Navajo Nation.
This case was handled by the Environmental Protection Unit and Tax and Bankruptcy Unit of the Office’s Civil Division. Assistant U.S. Attorneys Robert William Yalen and Joseph Pantoja, along with Alan S. Tenenbaum, Katherine Kane, Frederick S. Phillips, Marcello Mollo, and Erica Pencak of ENRD, are in charge of this case.