Deterring unsafe acts by industry

As court proceedings involving the infamous Freedom Industries chemical spill into a West Virginia river wind down, it is worth assessing whether what happened will deter other companies from similar misbehavior. Because of the public health aspects of the case, it is important other corporate executives – and employees on down the line – get the right message.

About two years ago, a chemical leaked out of a Freedom Industries storage tank along the Elk River near Charleston. When the substance drained into the stream, it tainted water supplies for hundreds of thousands of people. Some reported ill effects from drinking the water.

State and federal officials moved quickly to hold Freedom and its officials to account. Questions remain about why preventive action was not taken by government agencies.

Within days of the leak, Freedom declared bankruptcy. One hazard for stockholders of a corporation with a devil-may-care attitude toward safety is they may lose their investments.

AIG, the company’s insurer, has paid out $3.1 million in settlements against claims. Another deterrent, then, is that insurers will take a dim view of companies putting them at risk.

What about the people who let it happen?

Freedom’s ex-president, Gary Southern, was convicted of criminal negligence and lost $300,000 in a settlement. No doubt he has paid substantial sums to attorneys defending him. A federal judge is to sentence him for his crimes later this month.

Several other company officials have been fined and sentenced to probation.

Even one who attempted to prevent the catastrophe, a former plant manager who at one point suggested a retaining wall be built around the tank that eventually leaked, was placed on probation. His fine, just $2,500, reflected various factors including his health, the fact he cannot get a job, and his one attempt to prevent the spill.

Freedom itself probably will never pay any fines because its assets, between $2 million and $2.5 million, will be eaten up in bankruptcy proceedings. Most of the money is likely to go to victims of the spill.

Bottom line? Ignoring safety in the interest of higher profits, as some Freedom officials did, can be hazardous to a company’s financial health and to its very existence. Will the practice persist? Undoubtedly – but not because West Virginians failed to come down hard on culpable executives.