FBI accuses company executive of lying about West Virginia chemical spill

The executive charged in a West Virginia chemical spill that left 300,000 people without drinking water lied about his role with the involved company to protect his personal wealth of nearly $8 million from lawsuits, according to an FBI affidavit.

Freedom Industries President Gary Southern repeatedly told investigators he had little to do with the company before it was sold a few weeks prior to the January chemical spill. But an FBI affidavit said Southern had overseen day-to-day operations at the chemical storage company, hired employees and executed contracts for several years, according to a complaint unsealed Monday.

On Jan. 9, a tank at Freedom Industries in Charleston, Virginia leaked coal-cleaning chemicals into the Elk River, about a mile and a half upstream from a water treatment plant. Tap water from faucets developed a blue-green tinge and an odor that residents described as licorice-like. Drinking the water was banned for several days. Investigators discovered holes in tanks, shoddy last-resort containment walls and other deficiencies.

Despite distancing himself from the running of the company, Southern had negotiated its sale in December 2013, including how much money would be set aside to deal with necessary repairs at the site, the complaint said.

Southern has denied wrongdoing. He was arrested in Florida on Monday and faces charges of bankruptcy fraud, wire fraud and lying under oath. If convicted of all the charges, he faces up to 30 years in prison.

"They are either outright lies, or are, at the very least, misleading," FBI Special Agent James F. Lafferty II said in a sworn statement. "All of the statements indicate or suggest an effort to deflect blame from Southern for the discharge of [the chemical] MCHM into the Elk River, which resulted in the denial of water to thousands of people and businesses, for most uses, for several days."

Southern's public image suffered when he appeared unsympathetic to much of an entire valley of people lacking clean water.

The day after the spill, he told reporters he’d had a "long day" and tried to leave a news conference multiple times. He swigged a bottle of water in front of TV cameras, while many people across nine counties were ordered to use tap water only to flush toilets.

"Look guys. It has been an extremely long day," Southern said on Jan. 10. "I have trouble talking at the moment. I would appreciate if we could wrap this thing up."

Southern was arrested in Florida, where he owns a home on Marco Island. He was scheduled for an initial court appearance in Fort Myers on Tuesday.

Freedom had filed for bankruptcy eight days after the January spill, and Chemstream Holdings Inc. had purchased Freedom Industries on Dec. 6, 2013, just weeks before it happened.

The affidavit said Southern had a "substantial motive" to downplay his employment with Freedom. He was trying to protect his net worth of at least $7.7 million from dozens of lawsuits already filed over the spill and any potential new ones, according to the affidavit. Many businesses sued Freedom, Southern, the regional water company and other related parties because the tap-water ban had shuttered their operations for days.

Creditors are seeking more than $176 million. Many involved in the case do not think much money will be left, however, and point to Freedom's proposed $2.9 million insurance settlement as the biggest pot of money.

The affidavit said Southern started May 2009 as chief operating officer with direct oversight over the Charleston facility where the spill occurred. He also was on the board of directors from March 2010 to October 2013.

In bankruptcy court, Southern described his role as a "part-time, financial type consultant to help the owners of that business get their finances and systems kind of back on track."

He said he was involved only "superficially" in Chemstream's purchase of Freedom. He also told a committee of creditors, under oath, that he was not part of the Freedom organization before the acquisition, the affidavit said.

Attorneys for Southern did not return a phone message for comment Tuesday.

Southern was fully aware of the lawsuits facing him and the FBI and EPA investigations into possible Clean Water Act violations. U.S. Attorney Booth Goodwin said the charges were part of an ongoing investigation.

The Associated Press