Asbestos News

W.R. Grace files for bankruptcy

Taxpayers may get cleanup bill for asbestos contamination

By Andrew Schneider, Seattle Post-Intelligencer, April 3, 2001

Saying it can’t handle the flood of asbestos personal-injury lawsuits, W.R. Grace & Co. has filed for Chapter 11 bankruptcy protection.

Because of the filing, taxpayers may get stuck with millions of dollars for cleaning up sites contaminated by the 150-year-old company.

Nowhere was the announcement more strongly felt then the tiny northwestern village of Libby, Mont.

The Seattle Post-Intelligencer reported in November 1999 that hundreds of people had died or become ill with asbestos-related disease from the Libby mine.

“This doesn’t come as a surprise. We’ve known that Grace was going to use the legal system to get out of its responsibility to the hundreds of people their actions have sickened or killed in Libby,” says Gayla Benefield, whose parents both died from exposure to asbestos contaminating the ore at Grace’s nearby vermiculite mine.

“There are hundreds of people in Libby who are relying on Grace’s promise to pay their medical bills for treatment of the diseases caused by the asbestos and they have no idea what (the bankruptcy) will mean to their future,” Benefield said.

Last year, the company promised $250,000 a year to Libby’s only hospital, St. John’s Lutheran, and established a medical insurance program for former miners, their family members and other members of the community who have asbestos-related diseases. About 200 people have already applied for the insurance and the number is expected to soar.

Rick Palagi, the hospital’s administrator, says he really doesn’t know what Grace will do.

Grace President Paul Norris said yesterday that his company has received more than 325,000 asbestos personal-injury claims, which have already cost the company nearly $2 billion.

The federal government has done health screening on 6,114 people or who live or lived in or near Libby. Analysis of the first 1,067 examinations showed that 30 percent of the people had signs of asbestos-related disease. With it often taking 20 years or more for the disease to become apparent, no one is willing to guess how many people will be sickened because of the exposure to asbestos in Libby and other sites that processed the vermiculite.

It is estimated that hospitalization, oxygen, medication and home care can cost a person between $300,000 to $500,000 during the course of the illness.

“We will do everything we can for our people, but we’re a small rural hospital, and funding is always a problem,” Palagi said. “Most of these people don’t have health insurance and if Grace stops supporting its program, there will be a lot of people hurting.”

Grace did not return calls asking about its intentions regarding the hospital program.

Last year asbestos-related claims against Grace increased 81 percent, and there were “even higher increases for the first three months of this year,” Norris said.

Grace is the sixth major company to cite asbestos claims as their reasons for filing chapter 11 since January. Twenty-six companies have made such filings since 1982.

Most of the hundreds of thousands of pending asbestos suits are filed against multiple defendants. The litigation will often list 10, 20 or more corporations that either produced asbestos or used it in products they manufactured.

Not so when it comes to the people of Libby, the people who worked at vermiculite expansion plants around the country and the plaintiffs in six national class-action suits filed on behalf of as many as 2 million homeowners who have used Zonolite attic insulation. Grace is the principal defendant in these cases, as it was the primary supplier of vermiculite for Zonolite.

“For the Libby claims, there is generally only one, just W.R. Grace. The exposure was 100 percent due to Grace,” said Jon Heberling of the Kalispell firm that filed many of the suits on behalf of the Libby miners and their families.

“It is especially sad for Libby, because these people were Grace’s own workers and families. Now Grace is attempting to hide from its responsibilities to them,” Heberling said.

Grace said it “plans to work closely with asbestos claimants and other creditors in order to address valid asbestos claims.” But no details were provided.

“This is a voluntary decision that, although very difficult, was absolutely necessary for us,” Norris said.

“We believe that the state court system for dealing with asbestos claims is broken, and that Grace cannot effectively defend itself against unmeritorious claims. The best forum available to Grace to achieve predictability and fairness in the claims-settlement process is through a federal court-supervised Chapter 11 filing.”

The Environmental Protection Agency is conducting investigations at 55 sites throughout the country where Grace ran expansion plants that turned the vermiculite ore into insulation and garden and construction products. Sixteen other sites have been identified as being contaminated enough to need cleanup.

EPA said it was unable to estimate cleanup cost for these locations, but said that if Grace doesn’t pick up the bill, the cost will be paid by the state or federal government.

Friday, EPA filed a complaint against Grace in federal district court in Missoula to recover more than $10 million that the agency has spent thus far investigating and cleaning up contamination from the Libby mine. The lawsuit also asks the court for a judgment for any future EPA costs for more investigation and cleanup.

“Our priority is to clean up the asbestos contamination that is endangering the public health and environment in Libby,” said Paul Peronard, EPA’s on-scene coordinator. “The goal of this action is to ensure that W.R. Grace, which caused the contamination, will pay to clean it up, not the taxpayers.”

But that was before Monday’s bankruptcy filing.

EPA lawyers spent hours yesterday talking to Justice Department attorneys to see whether they could still demand that Grace pick up the tab for Libby.

“At this point, it looks like any orders we issue to Grace will have to be filed through the bankruptcy process.

What Grace does or doesn’t do will be decided by the judge,” said Matthew Cohn,an EPA enforcement attorney.

EPA was counting on Grace, not taxpayers, paying the cleanup costs for Libby.

“We budgeted between $14 and $16 million for this year, and it now becomes a problem of getting that money,” Peronard said. “It’s looking more and more like taxpayers will pick up what Grace drops.”

The company was started in 1854 by William Russell Grace, who had fled the Irish potato famine for Peru.

There, he chartered ships to trade bat guano and bird droppings. Today, the company has annual sales of about $1.6 billion and more than 6,000 employees.

EPA has been working closely with forensic accountants in the Justice Department to see whether the company has moved its assets to other, newly formed corporations.

“There is no truth to that at all,” William Corcoran, Grace’s vice president for corporate affairs, said in an interview last month.

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