As a federal judge prepares to sentence the last of six Freedom Industries officials on charges related to the January 2014 Elk River chemical spill, allegations of bankruptcy fraud are again in play as part of the argument over whether former Freedom president Gary Southern should serve any jail time for his role in water pollution crimes that caused the contamination of drinking-water supplies for hundreds of thousands of Kanawha Valley residents.
Federal prosecutors already had been making an issue of the bankruptcy fraud charges, arguing in their sentencing memo that, in sentencing, Southern U.S. District Judge Thomas E. Johnston should consider allegations that Southern lied in U.S. Bankruptcy Court to protect his personal wealth from Freedom's creditors and from spill victims who had filed civil court lawsuits over the contamination.
Now, in a legal brief filed Monday evening, Southern's defense lawyers revealed that the parties had agreed to increasing the recommended sentencing range for Southern based on an enhancement for some unspecified "obstruction of justice" by Southern.
Southern faces a maximum of three years in prison after he pleaded guilty to three water pollution crimes: negligent discharge of a pollutant; causing a discharge of refuse; and violating a condition of a Clean Water Act permit. Johnston is scheduled to sentence Southern during a hearing at 2 p.m. today.
So far, only one of the five former owners and other officials from Freedom Industries who pleaded guilty to spill-related criminal charges has been sentenced to any jail time. That defendant, former co-owner and longtime Freedom president Dennis Farrell, received 30 days, the minimum sentence allowed.
Plea deals, approved by then-U.S. Attorney Booth Goodwin, which included only misdemeanor charges, played a major role in Johnston giving four of the Freedom officials - William Tis, Michael Burdette, Robert Reynolds and Charles Herzing - probation and fines, but no jail time.
Complex calculations under the advisory U.S. Sentencing Guidelines also have played a role in the sentencings, as have the decisions by acting U.S. Attorney Carol Casto to advocate fairly generous credit in sentencing for "substantial assistance" to prosecutors to Tis, Burdette, Reynolds and Herzing.
Johnston also has minimized the seriousness of the spill, saying that chemical exposure was only an "immediate irritant" and that the court had been presented no evidence that MCHM posed a long-term health threat to anyone. Prosecutors sat silent when the judge made those determinations, presenting no evidence about the impact on victims of the spill and only beginning to argue strongly about the scope of the spill in Southern's case, after the first five sentencing hearings were concluded.
In the Southern case, defense lawyers say Southern's recommended sentence under the federal guidelines is 24 months to 30 months. The defense argued in its initial court filing that the judge should go well below that range, to a probation-only sentence. The defense cited the same reasons Johnston used in giving Farrell a sentence well below his recommended sentence of 18 to 24 months - that the guidelines range was based on "knowing" crimes or felonies, and the guidelines said a lighter sentence may be warranted for "negligence" or strict liability permit violations prosecutors allowed in the Freedom officials' plea agreements.
Prosecutors, though, argued that Southern deserves to be treated more harshly than the other Freedom defendants, partly because "he attempted to mislead the bankruptcy court about his role with Freedom," to avoid potential financial consequences of the spill. In their plea deal with Southern, though, prosecutors dropped 12 felony counts related to the bankruptcy fraud allegations, a move that reduced his maximum potential sentence by 85 years and greatly cut his potential recommended sentence under the federal guidelines.
The plea deal also allowed Southern to get back more than $7 million and a Bentley luxury automobile that federal agents had seized from him.
In their new filing, defense lawyers don't specifically reference those bankruptcy fraud allegations, but they do mention an "agreed-upon" enhancement of Southern's "offense level" - the calculation used to determine his recommended sentence - for some unspecified "obstruction of justice." Defense lawyers say the conduct at issue occurred 18 months before Southern's August 2015 guilty plea, or at about the time of the spill and the events that followed. Defense lawyers also say that Southern "deeply regrets" the conduct at issue.
The sentencing guidelines allow for such an enhancement and also allow other "relevant conduct" to be considered by judges during sentencing.
Reach Ken Ward Jr. at kward@wvgazettemail.com, 304-348-1702 or follow @kenwardjr on Twitter.