EXIDE VERNON BREAKING NEWS: Bankruptcy judge approves U.S. Justice Department’s $133 million nonprosecution agreement with Exide that requires company to admit its criminal conduct with operation of Vernon lead smelter and to close and clean up contaminated plant. Exide, now owned by JPMorgan Chase and other banks, can be prosecuted during the next 10 years for felony environmental offenses it committed during past 20 years if it fails to adhere to terms of Justice Department deal
Exide’s $133M No-Prosecute Deal OK’d In Pollution Row
Law360, Los Angeles (March 27, 2015, 8:13 PM ET) — A Delaware bankruptcy judge on Friday approved a nonprosecution agreement between Exide Technologies Inc. and federal prosecutors requiring the company to admit to illegally handling hazardous waste at its Los Angeles-area battery recycling plant, and to close and clean up the plant, among other remedies costing up to $133 million.
Under the deal reached earlier this month, Exide would pay $50 million in cleanup costs and acknowledge having illegally stored, shipped and transported hazardous waste, the U.S. attorney’s office said. The plant — which Exide admitted produced hazardous waste including lead, cadmium, arsenic and volatile organic compounds — stopped operating a year ago, but the company had allegedly planned to resume operations soon.
Exide will also put $3 million into an off-site corrective action trust fund within 30 days of its Chapter 11 approval and pay for periodic lead and arsenic blood testing for residents near the plant, according to the deal.
Exide’s total costs will actually amount to more than $100 million, as it will abandon recent improvements to the Vernon, California, plant and incur new expenses for lead and plastic that have to be bought to manufacture new batteries, authorities said. The deal also requires Exide to make quick payments toward a $9 million trust fund used to clean up 216 nearby residential properties.
The U.S. attorney’s office said the deal will ensure that money will be available to pay for the cleanup of the Vernon site and other toxic sites in the U.S. The threat of criminal prosecution would likely have forced Exide’s liquidation, authorities said.
“The reign of toxic lead ends today,” Acting U.S. Attorney Stephanie Yonekura said in a Thursday statement. “After more than nine decades of ongoing lead contamination in the city of Vernon, neighborhoods can now start to breathe easier.”
Exide also agreed that, over the next 10 years, it could be prosecuted for the felony environmental offenses it previously committed, if it doesn’t stick to the terms of the deal, the U.S. attorney’s office said.
Exide, which sought Chapter 11 protection in June 2013, said it would ask a bankruptcy judge at a March 27 hearing to approve its agreements with the California Department of Toxic Substances Control and federal prosecutors and to authorize the Vernon plant’s closure. The company plans to seek confirmation of its Chapter 11 reorganization plan at the same hearing, it said.
“The agreements … should allow us to resolve key conditions to funding of the backstop commitment agreement, and to continue to pursue plan confirmation,” Exide President and CEO Robert M. Caruso said in a statement issued earlier this month.
Just before the deal was announced, XL Insurance Co. objected to Exide’s bankruptcy reorganization plan, saying it contained too little detail on a $3 billion group of claims connected to pollution and bodily harm from the Vernon plant. A Delaware bankruptcy judge gave Exide the green light earlier this month to solicit votes for the restructuring plan, which would trim $600 million in debt, and blessed a slate of motions designed to facilitate its exit from Chapter 11.
The plant, which Exide acquired in 2000, recycled lead from used automotive batteries and other sources, according to DTSC. A 2002 order required the company to clean up residential, industrial and other areas impacted by its facility.
In 2013, DTSC determined the Vernon plant was responsible for lead contamination in the yards of two residential neighborhoods, it said. The agency ordered Exide to sample and clean yards at properties that allegedly exceeded California’s strict standards for lead contamination in soil. The sampling and cleanup are ongoing.
In November 2014, DTSC ordered Exide to pay a $1.3 million fine and set aside $38.6 million for plant closure and cleanup, the agency said. In January of this year, it issued a statement of violations that included illegal treatment of hazardous sludge.
The following August, Exide revealed that it had received a subpoena from federal prosecutors in California seeking information on “materials transportation and air emissions” at the Vernon plant. The filing said that Exide and certain individuals were subject to the investigation.
In September, Gov. Jerry Brown signed legislation that asked for the facility to be closed if a new permit wasn’t issued.
State Sen. Ricardo Lara, D-Bell Gardens, who authored the bill, said in a statement earlier this month: “The news that Exide is finally to be closed will bring great relief to my constituents, who for decades have been exposed to toxic levels of lead and arsenic emissions from their Vernon facility. … We need a comprehensive review of soil contamination and better data on the health impacts to people who continue to be exposed to unhealthy levels of lead and arsenic.”
Exide is represented in the bankruptcy case by Anthony W. Clark, Kenneth S. Ziman, J. Eric Ivester and James J. Mazza Jr. of Skadden Arps Slate Meagher & Flom LLP.
The bankruptcy case is In re: Exide Technologies, case number 1:13-bk-11482, in the U.S. Bankruptcy Court for the District of Delaware.
–Additional reporting by Kurt Orzeck, Cara Salvatore, Matt Chiappardi, Evan Weinberger and Andrew Scurria. Editing by Kat Laskowski.