Friday, January 17, 2014
Freedom Industries Inc (“FF Inc”) at 1:25 pm Eastern time today filed an emergency petition under Chapter 11 of the U.S. Bankruptcy Code. It is an incomplete filing and not much can be determined from the documents at this point. FF Inc now known as the Debtor and probably soon to be known as the Debtor in Possession must file the balance of the documents no later than January 31st unless the Debtor for good cause shown on motion receives an extension of that requirement from the bankruptcy judge assigned to the case. Failure to file the missing documents is grounds for dismissal and the clerk is authorized to dismiss the case if there is no filing by the due date. For some reason the filing information and the docket sheet do not disclose the name of the bankruptcy judge assigned to the case. The case number is 2:14-bk-20017.
The name of the Debtor is Freedom Industries, Inc. It is a West Virginia corporation. The debtor has filed an entire slew of 'first day motions' such as for leave to pay employees and to pay benefits and such other things this is always done on the day the case is filed. I have not reviewed those motions yet at any great length. There will be plenty of time to do this since this is only the first day of what will probably be a very long process. One interesting motion filed today as one of those First Day Motions is one authorizing the Debtor to use existing “cash management, bank accounts and forms” as it continues its operations. This is somewhat unusual since the law normally requires the Debtor to close all his bank accounts open at the time of the filing and to open new accounts in an approved bank showing the case number of the bankruptcy filing and that the Debtor company is the Debtor in Possession. I am mildly interested in the “whys” of this motion.
The president of FF Inc is one Gary Southern who apparently is one of the founders of the company. Recently it was taken over by another company called Chemstream Holdings LLC which is listed on the corporate ownership declaration filed in this case as the owner of one hundred percent of FF Inc's stock. A company with a similarly named entity Chemstream Inc. is listed on FF's list of its “20 Largest Creditors” which was filed today in the case. There is no information other than the address of the creditor in Storystown PA and the amount of the claim against the debtor which is shown as $175.566.75 set out on this document This is not inappropriate since the form and rule under which it is filed does not require any further detail. More will be known about this after Creditor Schedules are filed in this case in two weeks.
Expect more over this weekend as the documents are reviewed by me and other curious people and, since this filing is in response to a newsworthy event, the poisoning of 300,000 West Virginians by FF's leaky 35000 gallon storage tank containing MEBS, when news media start talking in earnest about this case.
Wednesday, January 15, 2014
When I first began practicing law I spent a lot of time in criminal courts all over southern California and in some places not in southern California. I was hungry and there was money to be made, justice to be done. I spent a lot time doing minor drug cases most of which were pot cases. On one occasion early on I remember being in a courtroom waiting for my case to be called. I was brought up to attention when the court called the case of one of the sons of a prominent California officeholder. I listened intently to the colloquies between the DA and defendant's lawyer. It was a discussion about terminating proceedings and sending the defendant off to drug school and bringing him back in a year or so and dismissing the case when he comes back to court. That was my very first exposure to pre-trial drug diversion for minor drug cases that had heretofore been treated as serious life changing felonies. That also marked the beginning of the changes in California law that ultimately resulted in the1996 passing by the electorate of the Compassionate Use Act which created the affirmative defense of a treating physician's recommendation. In the almost 18 years since its enactment it has created a booming new industry in California the medical marijuana industry. California may yet join the company of Washington and Colorado by the legalization of marijuana for recreational use. We shall see.
Colorado's model for legalization is an integrated model in which 70% of what each retailer sells must be produced on site. This has not yet been called the Tenant Farmer model but that is really what it is. One of the consequences of this regulation seems to me to result in an artificial shortage and consequently higher prices to the consumer. Perhaps allowing a retailer to sell up to 30% from non on-site sources is an attempt to ameliorate that economic fact of life. Colorado's scheme went into effect on January first and by all accounts was a bigger success than the first days of signup for the ACA. It will be fun to see how Washington handles the distribution issue later in the year when its system goes live.
Washington's model is more like California's alcohol model of the package store in which alcohol of mostly any brand and type is available for purchase. This plan would seem to be one that may result in cheaper prices for the consumer. However we should note that part of selling point in the legalization of recreational mota was the pocket book.
Both states share a single problem. That problem is how do we collect the taxes? Who is ultimately responsible to pay the taxes? There are a couple of models. The excise tax model in which the tax is imposed on the manufacturer and it is recovered by the seller by folding this tax and some administration fees into the price of commodity like the federal excise tax on automobile tires is one that may be used by Colorado. Another example of the excise tax model is the proof based tax on beverage alcohol paid to the federal government by a distiller of liquor. Then there is the transaction-based tax more commonly called the “sales and use tax” model. Under this model the ultimate consumer is liable to pay directly the sales or use tax imposed on the commodity. This tax is generally collected by the seller and remitted to the tax collector at regular intervals.
There is nothing to prevent either of those two states, Colorado or Washington from using one or the other method other than some proscriptions in the Constitution that forbids taxation of goods made in another and forbidding excise taxes or 'imposts' on the goods of another state. Thus neither Colorado nor Washington could tax the mota produced in the other state simply because it was produced elsewhere. There is also nothing to prevent either state from utilizing a double taxation scheme. Either or both of them could impose both an excise tax on each pound (or other unit) produced and a percentage based tax on the transaction with the ultimate consumer. Greed is not an unheard of phenomenon.
Once the federal government comes to its senses about the issue of marijuana (misspelled by the feds as “marihuana” because of the lack of Spanish language skills of a congressional clerk) and realize what the phrase “the marijuana industry is a $25 billion underground economy” means it will join the feeding frenzy also.
There is one issue that all of us should be concerned about and that is the danger that the new lawful industry in states doesn't end up becoming monopolized by large corporations so that Americans are forced to buy prepackaged mota from only specified and licensed providers. There needs to be some sort of safety valve because a monopolized industry is always bad economically and qualitatively for the consumer. If you doubt this look at your utility bills including your cable and internet bills and you will instantly see what I mean. This problem bothers me a lot. The only way I can see to solve this problem in these opening years of a new economy for mutual benefit is to permit each person to grow a certain amount of marijuana for his or her own personal or household use and for gifting purposes.
I suppose we shall see what we shall see once the lobbyists and special interests are heard from.
Tuesday, January 14, 2014
The recent MEBS spill on the banks of the Elk River is the third environmental chemical disaster to occur in West Virginia in the last five years.
The first occurred in 2008 at the Bayer CropScience plant in Institute West Virginia. There was an explosion of a chemical waste tank containing chemicals used in fertilizers and pesticides in which two people lost their lives. The investigation went on for the better part of two years and resulted in 2010 of recommendations for better safety rules, set backs from water courses and better oversight of chemical facilities operating in West Virginia. In that same year in Belle West Virginia there was a release of toxic gas from a Dupont chemical plant that resulted in the death of one worker.
Again everyone consulted together. There were meetings after meetings and plans were drafted in the hope this would “never happen again.” These plans were polished and run by or perhaps even written by lobbyists for the chemical and mining industries that dominate the economy and politics of the Mountain State. The state's official motto (by act of its legislature) is the snappy Montani Semper Liberi which is roughly rendered in English as “Mountain Men are Always Free.” Apparently mountain men and women are not free from being poisoned by chemical explosions, leaks, and the poisoning of the state's somewhat potable water supply but they are free from those oppressive job killing regulations so hated by GOP congress critters and their pet tea baggers.. The current president of the West Virginia Senate told two reporters for the New York Times that the measure died because no one championed it in the Senate. No one championed it? Is he kidding? What do Mountain state legislators champion and enact in to law? State mottoes, state animals, state fish and state minerals? But they can not get reasonable health and safety laws enacted because no member has championed it? That says a lot about the state's legislature and the creatures inhabiting it.
Well here we are again. It's 2013 and another environmental disaster has occurred in Somalia West. This disaster has affected some 300,000 customers of a for-profit run from New Jersey seller of domestic water service. Everyone has jumped on the band wagon this time for sure. Even the US Attorney for the southern district of West Virginia, R. Booth Goodwin II, is investigating this time in order to determine if any laws of the US have been violated in this latest disaster. On January 10th Mr. Goodwin released the following statement to the press on this latest disaster:
“Yesterday’s release of a potentially dangerous chemical into our water supply has put hundreds of thousands of West Virginians at risk, severely disrupted our region’s economy, and upended people’s daily lives. My office and other federal law enforcement authorities have opened an investigation into the circumstances surrounding the release. We will determine what caused it and take whatever action is appropriate based on the evidence we uncover.”
I sure hope Mr. Goodwin has run that statement by the people and corporations that actually run West Virginia before making it. What will be the result of this investigation of this disaster? More meetings, more pressers, more smoke? More mirrors? More pollution and more coming environmental disasters is my guess. I am sorry to say that this will soon be forgotten and things will return to business as usual in the Mountain state.
Sunday, January 12, 2014
There is this town in West Virginia. It's called Charleston and it has been built up along the banks of the Elk River. This river is currently among other things a source of domestic water for some three hundred thousand people in a nine county area of West Virginia. It is also a source of income in the area as a result of just being a river. In pre-EPA days it also served as a sewer in which to dispose of all sorts of unwanted things. You name it and the river took it away for you. The coal-mining companies and their support industries dominate the economy and the politics of the area. There is very little local regulation of those core industries. The lion's share of regulation probably comes out of investigations undertaken by the Environmental Protection Agency was created during the presidency of Richard Nixon. This agency (which actually has Cabinet rank) is the same EPA the current GOP caucus in the House of Representatives have vowed to close down. God help the people of WV because their local politicians and pretty much the entirety of their congress critters aren't going to be of much help.
A company called Freedom Industries operates a coal-field services company in Charleston. When you think of coal-field think oil-field as in oil-field services company like Halliburton Industries and its former CEO Dick Cheney. Among all the other things it owns on its campus along the Elk River is at least one storage vessel containing chemicals used in the mining of and/or treatment of coal extracted in the area. It contains perhaps a hundred thousand gallons of something I am going to call methylethyl bad shit. I am calling it that or MEBS because the exact nature of the chemicals used in many operations in the energy industry generally are regarded as protectable property interests. They are called trade secrets. So as a result we really probably won't find out what exactly has been flowing out of that tank into the Elk River. My point is simply that no one really knows what is stored in that tank. The problem of course is that somewhere around 7500 gallons of what I call MEBS and the industry calls a trade secret have leaked from that tank over an unknown period of time and into the passing Elk River. As a result of this catastrophe the domestic water supply for the surrounding nine county area has been shut down
Local domestic water service is provided by an entity calling itself West Virginia American Water. This company is owned/controlled by a for-profit corporation traded on the NYSE under the ticker symbol AWK. It is a large company and provides water service in 30 of the 50 states of the union and in parts of Canada. It even claims to have facilities in California. It is the largest for profit water and wastewater facility in the US. Its name is American Water. According to its website it engages in “regulated activities” which I assume is the manufacture, storage and delivery of water for whatever use its customers want to make of it. It also has something it calls “market based” activities. I am not even sure I want to know what those are. Perhaps American Water *AWK” is moving into the medical marijuana business. Who knows? I will admit that as a four term veteran of the governing board of a publicly owned water utility that I have a bias against privately owned water utilities even if they call themselves publicly traded as does American Water. American Water says it is publicly traded in order make you think you have some say in its policies and operations. The only control you have is the universal choice offered by every monopoly, if you are unhappy “go buy from my competitor.” You can't even 'fire the bastards' at the next election. Frankly stated my position is that essential utilities like power, water, sewer, communications and internet providers are too important to us in this time of our history to be owned by plutocrats whose only concern is the dollar value of their investment.
It seems there has been an intrusion of MEBS into the local water supply which is the river that runs along side the town. Yes the Elk River. Suddenly the powers that be in West Virginia who exercise whatever regulatory powers the dominant industries have endowed them with have decided that the domestic water supply drawn from the river is unsafe for any use whatsoever. Don't drink it. Don't cook with it. Don't bathe with it. Don't let it touch you. It may kill you or make you seriously ill. That's a mouthful for any water purveyor to say even a for profit one like West Virginia American Water.
Water is a public resource without which life could not exist and consequently we as a society have gathered together and created publicly owned and controlled entities to manufactures, treat, store and distribute water to enable our society to exist and hopefully prosper. It is here to be shared not just by us but by other inhabitants of the planet. It is not here to be fouled by us or anything else including our destructive energy extracting policies tilted in favor of the extractors.. This public resource has been fouled and perhaps even destroyed because of lax profit-driven in-name-only schemes of regulation operating for the benefit of the regulated not for the benefit of us.
Now this great big multi-national water utility is faced with the problem of having to restore dependable, healthy, safe drinking water to 300,000 customers. This is going to be an enormous and enormously expensive operation. The first thing that needs to happen is to determine all the source[s] of the leakage into the Elk River and then stop them. Soil will probably even have to be removed and trucked elsewhere. Once that is done American Water can begin the process of draining the current storage and delivery facilities affected by the leak and flushing the entire system until such time as contaminants are below specified parts per million. That of course begs the question what are we going to do with the contaminated effluent? Dump it back in the Elk River? That water is going to have to be relocated and effectively dumped in someone else's backyard.
This is going to be a major undertaking and I am sure beyond the resources of West Virginia American Water. Don't expect the parent American Water, the publicly traded NYSE company or any of its subgroups to dig deep to fund this. That is one of the reasons why the legal structures of AWK is so diversified along state lines in order to insulate AWK and its owners from having to dig deep to pick up the tab for cleanups like the Elk River Mess. If all else fails West Virginia American Water can simply file for bankruptcy relief effectively isolating AWK and its other subunits from the Mess in Elk River and walking away. There is an ugly reality staring us in the face and we had better figure out a way to deal with it. If nothing else this critical occurrence in Appalachia shows the need for independent monitoring of industrial uses along critical waterways. It also points the way to the folly that is the privatization of essential utilities. Privatization is a fraud and we need to recognize that. We also need to understand the almost suicidal folly eliminating the EPA is that is now buzzing around the ears of Congress members. All this is learnable from the Elk River Mess.
Sunday, January 5, 2014
This story appears in the Sunday January 5th edition of the Washington Post. In short the story is that billionaire Amazon.com founder turned newspaper publisher was felled by a kidney stone while on vacation on one of the more remote of the Galapagos Islands and flown by an Ecuadoran naval helicopter to another island where Bezos' had his private jet parked. There apparently was a stop at a local hospital for Bezos before flying on to the US for medical treatment. I suspect the local hospital is where he got his shot and his stone catcher.
I can see why the Washington Post published the story, after all he owns the freaking newspaper and I don't think that any of his underlings wanted El Queso Grande to think his people were ignoring his pain. Based on my own life experiences with the occasional kidney stone I do not question the depth of his pain and believe me I can feel his pain. I remember my first kidney stone and the pain was awful. Most kidney stone treatment involves a welcomed shot of some narcotic such as Demerol and some imaging. In most cases the sufferer (myself included) is released with instructions to drink gallon after gallon of water and to strain one's urine output in an attempt to retrieve the stone and also given a prescription for a bottle of Vicodin with instructions to also take a laxative to avoid constipation from taking the Vicodin.
I just question the newsworthiness of this story about Mr. Bezos. Perhaps it is newsworthy as an attempt to point out the difference in the lengths that obscenely wealthy people will go to relieve their pain while ignoring the pain of countless millions of other of people of lesser means. Feel better Jeff.