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Exide targeted in Federal criminal probe of Vernon plant



Exide Targeted in Federal Criminal Probe of California Plant

Battery Maker Receives Grand Jury Subpoena Involving Lead-Recycling Plant

August 15, 2014 12:02 PM


Exide Technologies has been hit with a grand jury subpoena in connection with a criminal investigation involving its Vernon, Calif., lead-recycling plant.

In a filing with the Securities and Exchange Commission, the battery maker revealed the Aug. 8 subpoena seeks “documents relating to materials transportation and air emissions.”

Exide itself and “certain unidentified individuals” are targets of the investigation” being conducted by the Justice Department in the Central District of California, the SEC filing says. Revelation of the federal criminal probe is the latest development in a long history of trouble involving the Vernon plant, a source of cheap lead for Exide’s battery-making operations.

Exide said in the SEC filing that it “will cooperate” with the probe, but is unable to estimate “the amount or range of loss, if any, in this matter.”

Shortly before Exide filed for Chapter 11 bankruptcy protection last year, the plant was ordered closed by regulators due to contamination. It was later reopened but was closed again this year. The second closure forced Exide to go back to the bargaining table with creditors to rewrite the business plan that will form the backbone of the company’s bankruptcy-exit plan.

According to Exide, the closure was part of a routine maintenance, but reopening was delayed so that the facility could get into compliance with “new health, safety and environmental standards that became effective” while the plant was out of operation.

The loss of cheap lead from the Vernon plant could eat $15 million to $38 million out of annual earnings, the company has warned. Exide has said it is making adjustments to its business plan to account for the possibility it won’t be able to bring the Vernon plant back online and will have to buy lead on the open market instead. Thursday, Exide said it was laying off 64 people who had been laboring to get the Vernon plant ready to reopen, under an arrangement with the South Coast Air Quality Management District Hearing Board.

Another 73 people are being kept on the job at Vernon, Exide said, to install new emissions-control equipment “and develop enhanced operating, maintenance and environmental procedures to support a successful restart of the Vernon facility.”

Community groups say the plant is dangerous and in need of a massive cleanup from contamination that began decades before Exide took over the facility. Vernon’s problems have been a major factor in holding up Exide’s Chapter 11 exit plan, which is still being negotiated with major creditor groups.

The plan was due in July, but Exide has now asked to move its Chapter 11 plan filing deadline to Dec. 10. Exide’s creditor-repayment plan must resolve more than $1 billion in debts, including $675 million in senior loans.

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Federal grand jury investigating Exide Technologies over Vernon plant

A federal grand jury is investigating Exide Technologies, the company under scrutiny for emitting high levels of harmful pollutants from its battery recycling plant in Vernon, according to a financial disclosure filed this week.

On Aug. 8, Exide received a “grand jury subpoena from the Department of Justice in the Central District of California in connection with a criminal investigation involving its Vernon, California, recycling facility,” the company reported in documents filed with the Securities and Exchange Commission.

The subpoena requested “documents relating to materials transportation and air emissions,” in an investigation targeting Exide and “certain unidentified individuals,” the filing said.

The federal investigation is the latest escalation in a series of troubles for the Vernon battery plant.

Community groups and elected officials have demanded the facility’s closure since a March 2013 health study found its arsenic emissions posed an increased cancer risk to more than 100,000 people across southeast Los Angeles County. The plant has been cited repeatedly by environmental regulators in recent years, often for emitting too much lead.

A statement issued by the Milton, Ga.-based company confirmed “that it has been identified as a target of the grand jury investigation, and that the company intends to cooperate with the investigation.”

A spokesman for the U.S. attorney’s office in Los Angeles declined to comment. Grand jury proceedings are secret by law.

Under an agreement reached last month with the South Coast Air Quality Management District, the Exide plant may not resume operations until it upgrades its pollution controls to keep arsenic emissions from drifting into surrounding neighborhoods.

Arsenic is a human carcinogen that can cause skin problems and increase the risk of cardiovascular disease and lung cancer. Lead, a potent neurotoxin that accumulates in the body, can cause learning disabilities in children, even at low levels.

The federal investigation was welcomed Friday by community activists who have sought to have the plant closed permanently and have demanded an extensive cleanup of airborne lead that authorities believe has been deposited in the soil over many years.

“Hopefully, this is another way to bring Exide to accountability,” said Msgr. John Moretta of Resurrection Catholic Church in Boyle Heights. “You have a company that has a whole list of violations and, year after year, they pay a fine and they are allowed to continue working.”

The Vernon plant has operated since 1922 and was taken over by Exide in 2000.

Crews hired by Exide on Monday began cleaning lead-contaminated soil from two homes near the plant after tests conducted last fall found elevated levels of the harmful metal in dozens of residences and a preschool in nearby Boyle Heights and Maywood. Also this week, state environmental officials began a two-month project to expand soil lead testingaround the plant to at least 144 additional homes across a two-square mile area where more than 60,000 people live.

On Tuesday, Los Angeles County supervisors wrote a letter to Gov. Jerry Brown criticizing as “piecemeal” the testing and cleanup of nearby homes overseen by the California Department of Toxic Substances Control. The state agency has allowed the company to operate for decades without a full permit.

A bill making its way through the state Legislature would require the department to make a final decision on the Vernon facility’s hazardous waste permit by the end of 2015 or revoke its “interim status.”

Sen. Ricardo Lara (D-Bell Gardens), the bill’s author, said in a written statement that “news of this investigation raises serious concerns and seems consistent with Exide’s lack of accountability to the communities that have been victims of exposure to contamination and pollution from years of serious violations.”

“It’s time to establish a hard-line timetable for Exide to bring its facility into compliance or shut down,” he said.

Exide, one of the world’s largest producers of lead acid batteries, filed for Chapter 11 bankruptcy protection last year.

In the SEC filing, Exide said it may not complete the upgrades required to restart its Vernon plant until the end of March 2015, “should the company decide to proceed.”

The South Coast air district has a pending lawsuit against Exide in Los Angeles County Superior Court seeking up to $40 million in penalties. The U.S. Environmental Protection Agency cited Exide in May for a series of lead emissions violations at the Vernon plant.


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