Case 2:14-bk-20017 Doc 793 Filed 05/04/15 Entered 05/04/15 11:59:58 Document Page 1 of 18 Desc Main UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF WEST VIRGINIA In re FREEDOM INDUSTRIES, INC., Debtor. ) ) ) ) ) ) ) Chapter 11 Case No. 2:14-bk-20017 WEST VIRGINIA DEPARTMENT OF ENVIRONMENTAL PROTECTION’S OBJECTION TO DEBTOR’S MOTION TO PROCEED WITH PLAN SOLICITATION AND CONFIRMATION AND CROSSMOTION FOR ORDER DIRECTING REMEDIATION Taken together, the Chief Restructuring Officer’s repeated refusal to present an effective and acceptable remediation plan and the recently filed conflict-ridden amended Chapter 11 plan evidence the true colors of its Chief Restructuring Officer and the professionals retained in its bankruptcy case. As the sun sets on Freedom and its disastrous chemical spill, Freedom’s resulting bankruptcy case now boils down to this: Freedom’s retained professionals seek to abuse their position as the representatives of the debtor in possession to extract eleventh-hour, wholly irresponsible and unwarranted concessions from DEP concerning the extent of Freedom’s remediation obligations solely to further their own economic self-interest by enhancing the recovery on account of their outlandish fees. While claiming that Freedom lacks sufficient funds to remediate the Etowah site in accordance with its acknowledged obligations under the Voluntary Remediation Program (the “VRP”) and applicable law, the Chief Restructuring Officer and his bankruptcy counsel filed an amended Chapter 11 plan that nevertheless distributes $6.5 million to creditors, including $2.5 million to pay the accumulated fees and expenses of the estate’s professionals. Knowing full well that DEP has repeatedly rejected the remediation plan at the center of that Chapter 11 plan 1 Case 2:14-bk-20017 Doc 793 Filed 05/04/15 Entered 05/04/15 11:59:58 Document Page 2 of 18 Desc Main as wholly inadequate, he and his bankruptcy counsel then embarked upon a scheme last Friday to extract concessions from DEP concerning the extent of Freedom’s remediation obligations. Their sole purpose, as the facts and circumstances set out below establish, is to assure that Freedom has the necessary funds to pay the $2.5 million in fees and expenses of the estate’s professionals, including themselves, as provided under the amended Chapter 11 plan. Thus, the Chief Restructuring Officer and his bankruptcy counsel seek to abuse their positions as the representatives of the debtor in possession to force DEP to accept an admittedly inadequate and incomplete remediation plan solely for the purpose of benefitting themselves and the other estate professionals. DEP will not negotiate the extent of professional fees paid in this case at the expense of the health, safety, and welfare of the residents of West Virginia or in exchange for allowing continuing violations of the State’s environmental laws. Freedom and its Chief Restructuring Officer and professionals have obligations to comply with applicable law, and particularly laws directed at protecting the public health and safety. Those obligations overshadow all else, and, indeed, the Bankruptcy Code bars Freedom and its professionals from even proposing a Chapter 11 plan that fails to provide for the debtor’s compliance with the law. Yet that appears to be precisely what the Chief Restructuring Officer proposes, not because Freedom lacks the resources to comply, but because compliance with the law would result in a dollar-for-dollar reduction in the fees and expenses paid to retained professionals under the Chapter 11 plan. Thus, not only do the Chief Restructuring Officer and his bankruptcy counsel seek unilaterally to limit Freedom’s remediation in violation of the law, compromise the health, safety, and welfare of West Virginians, and violate the Bankruptcy Code, their pursuit of the proposed plan contravenes their fiduciary duties to the estate and in some respects perhaps even their ethical obligations to this Court and otherwise. 2 Case 2:14-bk-20017 Doc 793 Filed 05/04/15 Entered 05/04/15 11:59:58 Document Page 3 of 18 Desc Main DEP, accordingly, objects to the motion for an order authorizing Freedom’s professionals to solicit acceptances and pursue confirmation of their plan and cross-moves for entry of an order (a) delaying consideration of the amended plan until Freedom complies in full with its obligations under the VRP or the DEP Consent Order, (b) directing Freedom’s licensed remediation specialist to immediately remediate the Etowah site, (c) directing the Chief Restructuring Officer to transfer $1 million to the licensed remediation specialist to fund the remediation (with any remaining balance returned to Freedom’s estate), and (d) directing Freedom’s other retained professionals to cooperate fully with the licensed remediation specialist and refrain from interfering in any way with the remediation or DEP’s supervision over the remediation and the licensed remediation specialist. BACKGROUND 1. A massive leak in the tank containing the chemical compound MCHM spilled into the Elk River in January 2014. Making its way down the Elk River, the compound entered into West Virginia American Water Company’s sole water intake, contaminating and shutting down the water supply to some 300,000 West Virginians, and radically altering West Virginians’ perspectives on the safety of their water supply for years to come. 2. DEP immediately issued three orders requiring Freedom to cease discharging the contaminant into the River, to control the runoff from the site, and to dismantle, clean, and remediate the site. 3. Although DEP often chided Freedom for undue delay in performing its obligations, Freedom generally complied with DEP’s enforcement orders. 4. In Fall 2014, Freedom expressed its desire to remediate the site through its participation in DEP’s Voluntary Remediation Program. 3 Case 2:14-bk-20017 5. Doc 793 Filed 05/04/15 Entered 05/04/15 11:59:58 Document Page 4 of 18 Desc Main To facilitate Freedom’s entry into the program, DEP and Freedom entered into a Consent Order, which allowed Freedom to pursue remediation of the site under the VRP. 1 6. After numerous fits and starts resulting only in more delay, Freedom finally applied for entry in the VRP in January 2015. 7. Since entry into the VRP, Freedom’s compliance with the requirements thereof has been inexplicably marred by still more delay. 8. Despite DEP’s extensive guidance, advice, and assistance prior to its application, Freedom did not submit a draft Voluntary Remediation Agreement (“VRA”) or a remediation plan with its application as DEP expected. 2 9. Nearly three months later, when Freedom finally submitted its VRA, it again did not include a remediation plan, despite the relatively simple nature of such a plan. 10. Now four months into the Voluntary Program, Freedom has yet to present DEP with a full remediation plan or even propose an acceptable interim remediation plan. 11. The first interim plan Freedom finally presented to DEP on April 22 proposed environmental testing on a single occasion at a location on the site recommended by Freedom, with that anticipated result, in Freedom’s view alone, expected to eliminate the need for any further soil removal and even further environmental testing. 12. DEP immediately conveyed its concerns with the first interim plan to the Chief Restructuring Officer and his environmental professionals. 1 As DEP has repeatedly explained to Freedom, this is a distinction without a difference; whether Freedom proceeds with remediation under the VRP or in accordance with the enforcement orders, the standard to which remediation must completed is set by the Secretary, and that standard is zero risk of contamination reaching WVAWC’s water intake. 2 While the VRP does not require such simultaneous submissions, Freedom repeatedly advised DEP that time was of the essence with regard to its application and acceptance into this Program and led DEP to believe that it would submit a proposed remediation plan with its draft VRA. 4 Case 2:14-bk-20017 Doc 793 Filed 05/04/15 Entered 05/04/15 11:59:58 Document Page 5 of 18 Desc Main 13. In response, Freedom demanded an on-site meeting with DEP’s Secretary and senior staff with the apparent hope of convincing them to accept Freedom’s deficient remediation plan. 14. Not only did Freedom’s professionals fail to sway DEP on the merits of the deficient plan at the April 27 on-site meeting, DEP’s on-site visit undeniably exposed Freedom’s persistent problem with MCHM contamination in both the soil and water at the site. 15. During the site visit, DEP officials directly and unequivocally detailed DEP’s concerns and reiterated yet again the requirements with respect to soil removal and water testing, and the Chief Restructuring Officer committed to producing a revised remediation plan addressing DEP’s concerns by May 1. 16. DEP subsequently confirmed during an inspection last week that MCHMcontaminated water remains on the premises and that the soil and fill material in the area around the former leaking tank still contain unacceptable levels of MCHM contaminants. 17. It is thus crystal clear that Freedom must continue to remove additional amounts of soil and fill from the site to prevent contaminated water from entering the Elk River and potentially affecting the region’s water supply again. Freedom’s environmental consultant, ARCADIS, has previously indicated that excavating the soil necessary to remove the contaminant alone will cost at least $500,000. 18. On Thursday, April 30, DEP accordingly rejected Freedom’s initial proposed interim remediation plan. 19. Despite DEP’s rejection of the initial remediation plan, the Chief Restructuring Officer and Freedom’s bankruptcy attorney nonetheless filed the proposed amended Chapter 11 plan. Even though the amended Chapter 11 plan hinges upon Freedom’s continued participation in the Voluntary Remediation Program, the amended Chapter 11 plan essentially embodies the very same remediation plan that DEP has repeatedly and unequivocally rejected. Further, 5 Case 2:14-bk-20017 Doc 793 Filed 05/04/15 Entered 05/04/15 11:59:58 Document Page 6 of 18 Desc Main notwithstanding the language of the amended plan, the Chief Restructuring Officer appears to interpret it to effectively cap the funds committed to the remediation at $150,000, though the Chief Restructuring Officer has stated, and Freedom’s bankruptcy counsel asserted in writing, that the Chief Restructuring Officer has only $90,000 he is willing and able to devote to remediation of the site. And in point of fact he proposes to allocate far less than $90,000 to actual remediation, as the Chapter 11 plan makes clear that the amount he allocates to remediation has to cover not only the actual remediation costs but also the fees and expenses of ARCADIS, the licensed remediation specialist, and DEP’s administrative expenses in overseeing the remediation project. See Amended Plan [Doc 788] at § 1.33. 20. The Chief Restructuring Officer, Freedom’s bankruptcy counsel, and its environmental professionals all fully know that neither sum comes close to providing for the performance of Freedom’s obligations under the VRP, much less to complying with Freedom’s obligations under the DEP Consent Decree. 21. As a result, the Chief Restructuring Officer initiated a two-prong approach to DEP on Friday, May 1. The Chief Restructuring Officer submitted yet another interim remediation plan he knew would fail to satisfy DEP’s conditions for Freedom’s continued participation in the VRP, 3 while his bankruptcy counsel demanded a meeting seeking, explicitly, to extract DEP’s concession to the admittedly inadequate remediation plan and Freedom’s continued violation of its legal obligations under the Voluntary Remediation Program and applicable law. 4 See, e.g., Email dated May 1, 2015 from Mark E. Freedlander to Kristin A. Boggs with a copy to Mark J. 3 DEP’s initial review of the amended initial remediation plan is that it provides only cursory responses to only some of the concerns DEP has conveyed to the Chief Restructuring Officer and his environmental professionals. 4 At almost the same time as the Chief Restructuring Officer’s bankruptcy lawyer requested that DEP’s general counsel coordinate a meeting, the Chief Restructuring Officer’s environmental lawyer also reached out directly to the program manager of the VRP to set up a meeting presumably to try to convince her to accept the deficient remediation plan. 6 Case 2:14-bk-20017 Doc 793 Filed 05/04/15 Entered 05/04/15 11:59:58 Document Page 7 of 18 Desc Main Welch, a copy of which is attached hereto as Exhibit A. Their scheme, as Mr. Freedlander’s email makes clear, was to proclaim Freedom’s lack of financial ability to perform its acknowledged obligations under the VRP and applicable law, 5 even while they simultaneously pursued confirmation of a Chapter 11 plan with $6.5 million in committed funding to pay Freedom’s creditors, including paying themselves and Freedom’s other retained professionals $2.5 million in fees and expenses. 22. As if only to highlight the subterfuge, Freedom’s bankruptcy counsel approached DEP directly and sought to exclude DEP’s bankruptcy counsel from the meeting. One can only surmise that the two hoped to proclaim Freedom’s abject poverty free from any suggestion that (a) the proposed Chapter 11 plan contradicts the Chief Restructuring Officer’s statement and (b) the Chief Restructuring Officer actually has available, and indeed proposes to distribute, more than $6.5 million in property of the estate, all of which appears under the terms of the proposed Chapter 11 plan to be available for remediation to the full extent required, including the roughly $3.2 million in AIG settlement funds that this Court expressly ruled are available for remediation of the site. See Order Clarifying the Right and Obligation of the Debtor-in-Possession to Recognize and Act on Enforceable Orders of the [DEP], Etc. [Doc 754]. 23. DEP submits it has now become apparent why the Chief Restructuring Officer has engaged in extensive and persistent delay and still refuses to present an acceptable remediation plan. It appears the Chief Restructuring Officer intentionally delayed matters with DEP while he negotiated settlements with Freedom’s past and present directors, officers, and owners and negotiated the terms of its Chapter 11 plan with the creditors’ committee, all with the obvious 5 In fact, the limited funds the Chief Restructuring Officer claims he has available to remediate the site undoubtedly would not cover even the costs associated with the amended interim remediation plan he proposed to DEP on Friday, May 1. 7 Case 2:14-bk-20017 Doc 793 Filed 05/04/15 Entered 05/04/15 11:59:58 Document Page 8 of 18 Desc Main intention of trying to jam an admittedly insufficient remediation plan down DEP’s throat at the last minute. 6 24. The plan did not and cannot work. ARGUMENT THE PROPOSED PLAN IS UNCONFIRMABLE AND SOLICITATION AND PURSUIT OF CONFIRMATION WOULD WASTE FREEDOM’S LIMITED RESOURCES 25. The Chief Restructuring Officer’s proposed Chapter 11 plan has all the appearances of being wholly unconfirmable. 26. First, it is an unstated but obvious condition of the Chapter 11 plan that Freedom remain in the VRP. Indeed, Section 1.33 of the Amended Plan [Doc 788] requires compliance with the DEP Consent Order and the fulfillment of Freedom’s obligations under the Voluntary Remediation Agreement. Yet, at the same time the Chief Restructuring Officer proposes to solicit acceptances and pursue confirmation of the Chapter 11 plan, the Chief Restructuring Officer (1) has submitted a remediation plan he knows to be unacceptable to DEP and not in compliance with Freedom’s obligations under the VRP and (2) has repeatedly taken the unequivocal position, now confirmed in writing by his bankruptcy counsel, that Freedom lacks the funds to comply with its known obligations under the Program. Taking the Chief Restructuring Officer and his bankruptcy counsel at their respective words (which DEP does not) that Freedom lacks the financial resources to remediate the site, 7 Freedom would have no hope 6 DEP suggests as well that the Chief Restructuring Officer’s appeal of this Court’s order clarifying the AIG settlement order reflects a similar aim. After initially appealing the AIG settlement order presumably because it limited the Chief Restructuring Officer’s use of the settlement funds, the Chief Restructuring Officer’s designation of issues on appeal focused primarily upon the clarification order which expanded the Chief Restructuring Officer’s right to use the funds for the additional purpose of remediation. See Designation of Record and Statement of Issues on Appeal [Doc 775]. Why would the Chief Restructuring Officer initially appeal an order he thought inappropriately limited his use of funds and then turn on an order that expanded his use of those funds? It now appears he wanted to maintain his ability to claim to DEP, as his bankruptcy counsel did in his email (Exhibit A), that he had limited cash available to remediate with no other sources of funding available. 7 DEP notes that this Court’s order clarifying its prior AIG settlement order [Doc 754] directly contradicts the affirmative statements of the Chief Restructuring Officer and his bankruptcy counsel. The clarifying order made 8 Case 2:14-bk-20017 Doc 793 Filed 05/04/15 Entered 05/04/15 11:59:58 Document Page 9 of 18 Desc Main of remaining in the VRP, as the applicant’s proof of financial ability to perform its obligations is an explicit requirement of continued participation in the Program, no hope of otherwise satisfying its obligations under the DEP Consent Order, and, accordingly, no hope of satisfying a necessary condition and, in fact, the central element of its Chapter 11 plan. 27. Even beyond the Chief Restructuring Officer’s admitted inability to satisfy a necessary condition of the amended Chapter 11 plan, this Court simply cannot confirm a Chapter 11 plan that effectively proposes as a central element the continuing and on-going violation of the law. 28. It is beyond question, as repeatedly confirmed by this Court and now unquestionably the law of the case, that Freedom has an obligation, first and foremost, to comply with its obligations under the State’s environmental laws and the DEP Consent Order and remediate the site. See also Midlantic Bank v. New Jersey Department of Environmental Protection, 474 U.S. 494, 106 S. Ct. 755 (1986); 28 U.S.C. § 959(b). Yet, that is precisely what the Chief Restructuring Officer proposes to do: by withholding sufficient funds to enable Freedom to comply with its remediation obligations under the VRP, much less the DEP Consent Order, the Chief Restructuring Officer essentially proposes—and seeks by hook or crook to extract DEP’s agreement—that Freedom maintain conditions that threaten to allow MCHM-contaminated water to flow into the Elk River in clear and obvious violation of the West Virginia Water Pollution Control Act and the DEP Consent Order, even while it pays out $6.5 million to the retained professionals and prepetition creditors. DEP cannot and will not consent to a continuing violation of the law, and this Court cannot confirm a plan that necessarily ensures that result. clear that the AIG settlement funds were available to complete the remediation. The fact that they raised an additional $3 million in unrestricted funds from other sources—funds they propose essentially to pay to themselves and the other retained professionals—also directly contradicts their affirmative (mis)statements. 9 Case 2:14-bk-20017 Doc 793 Filed 05/04/15 Entered 05/04/15 11:59:58 Document Page 10 of 18 Desc Main 29. Just as this Court cannot confirm a plan providing for the continuing violation of the law, the Court cannot confirm a Chapter 11 plan that is proposed in bad faith. 11 U.S.C. § 1129(a)(3). Yet, again, that appears precisely what the Chief Restructuring Officer and his bankruptcy counsel have done. In sum and substance, the Chief Restructuring Officer and his bankruptcy counsel appear to have proposed their Chapter 11 plan with the express intention of using the Chapter 11 plan and the confirmation process—often referred to as the “Confirmation Train”—to extract inappropriate and unwarranted concessions from DEP with respect to Freedom’s compliance with the requirements of the VRP and the environmental laws. That they base their demands on affirmative misrepresentations of fact concerning Freedom’s finances and the terms of the amended Chapter 11 plan for the sole and exclusive purpose of enhancing the recoveries of retained professionals, including themselves, only heightens the conclusion that they have proposed the plan in bad faith. 30. Finally, the separate plan summary makes clear that the amended Chapter 11 plan embodies at its economic heart a fundamental conflict of interest. 31. As an initial matter, the summary suggests that the Chief Restructuring Officer’s negotiations with Chemstream and other plan funders, in essence, sought to raise money only to pay professional fees: the AIG settlement funds comprise the sum total of funds paid to prepetition unsecured creditors; the plan contemplates that the overwhelming majority (nearly eighty percent) of the $3.12 million in funds contributed by Chemstream and Freedom’s former directors and officers, including Gary Southern who is listed separately, wind up paying nearly $2.42 million in professional fees. 8 See Summary [Doc 789] at p. 2. Indeed, in that regard, the Chief Restructuring Officer and his professionals give at least the appearance of having used 8 The professionals’ plan obviously required as an ancillary condition the raising of additional funds to pay secured and priority creditors, as their payment in full is required to secure confirmation of any Chapter 11 plan. 10 Case 2:14-bk-20017 Doc 793 Filed 05/04/15 Entered 05/04/15 11:59:58 Document Page 11 of 18 Desc Main estate assets—the estate’s claims against its former officers, directors, and controlling shareholder(s)—to secure a benefit primarily, if not entirely, for themselves. 32. But, more important for present purposes, the summary suggests that the plan, in reality, sets up the retained professionals as the estate’s residual interest holders, with an economic incentive to maximize their own recovery at the expense of other creditors and the estate. Based apparently upon present projections, the summary reflects that the professionals’ plan proposes to distribute $6.66 million to creditors, an amount that exceeds the anticipated $6.5 million available for distribution. See id. at p. 2. As a consequence, the summary shows a funding deficit of approximately $141,000. Id. Significantly, that figure corresponds roughly to the $150,000 allocated in the plan to the “DEP Dedicated Fund.” But the amount of the deficit would obviously increase if the amount of the “DEP Dedicated Fund” increased. Id. To make up for the projected deficit, as well as any further increase therein, the plan provides for a corresponding reduction in the reimbursement of professional fees and expenses. 9 See Amended Plan [788] at § 2.2(d); Summary at n. 2. As a result, for every dollar Freedom commits to the DEP Dedicated Fund, the amount available for the reimbursement of professional fees and expenses, assuming the Court allows them in full, would be correspondingly reduced on a dollarfor-dollar basis. 33. Thus, given the way the plan operates and the Summary projects matters, the retained professionals, and they alone, expect to suffer any increase (and benefit from any decrease) in amount of the DEP Dedicated Fund, such as may be required to fully remediate the site under the VRP or the DEP Consent Order. This puts the retained professionals in direct conflict with the estate and other creditors, as the retained professionals alone, not the Freedom’s 9 The plan does not apply the reduction across all retained professionals. It limits the covered professionals to McGuireWoods, Frost Brown Todd, Babst Calland, CEC, and Pietragallo. See Amended Plan at § 2.2(d). 11 Case 2:14-bk-20017 Doc 793 Filed 05/04/15 Entered 05/04/15 11:59:58 Document Page 12 of 18 Desc Main unsecured creditors whose distributions are, at least based on the Chief Restructuring Officer’s current projections, fixed, have a direct economic incentive in holding up DEP, with the concomitant possibility that the plan is not confirmed, settlements are not effectuated, and the distributions to creditors are not made, are reduced, or are delayed to the obvious detriment of creditors and the estate. 34. Simply put, the amended Chapter 11 plan should more aptly be described as “The Professional Fees Payment Plan,” as it plainly appears that the professionals’ plan negotiation efforts (over above and beyond the AIG settlement) were directed solely at securing a fund for the payment of professional fees and the professionals’ ongoing “negotiations” with DEP look to benefit only the retained professionals. Under the facts and circumstances of this case, the solicitation of acceptances and pursuit of confirmation of a flawed and unconfirmable plan would result only in an unnecessary waste of Freedom’s limited resources. THE COURT SHOULD DIRECT FREEDOM TO IMMEDIATELY REMEDIATE THE SITE AND PROVIDE ADEQUATE FINANCIAL ASSURANCE THEREOF 35. The actions of the Chief Restructuring Officer and his retained professionals throughout this case have resulted in unwarranted delay and have now manifested themselves in Freedom’s apparent repeated, steadfast, and stubborn refusal to comply with the requirements of the Voluntary Remediation Program and applicable law. 36. If allowed to persist, the obvious result will be Freedom’s removal from the VRP, the revival of the DEP Consent Order, and Freedom’s immediate and ongoing violation of the West Virginia Water Pollution Control Act and the DEP Consent Order to the detriment of the people of the State as well as Freedom’s creditors and other parties in interest as the Chapter 11 plan falls apart. 12 Case 2:14-bk-20017 Doc 793 Filed 05/04/15 Entered 05/04/15 11:59:58 Document Page 13 of 18 Desc Main 37. To prevent that result and to halt the Chief Restructuring Officer’s attempt to evade the required remediation and compliance with the law, this Court should direct Freedom to immediately remediate the Etowah site in compliance with its obligations under the VRP, the DEP Consent Order, and applicable law and ensure adequate funding therefor. 38. As is evident, however, DEP, at the highest levels of the agency, has lost all faith in the Chief Restructuring Officer. DEP gave him every opportunity and in fact has gone out of its way to support his efforts on multiple occasions in this Court and otherwise. It appears now that DEP’s faith in the Chief Restructuring Officer was either misplaced or unwarranted. 39. DEP notes, indeed, that the Chief Restructuring Officer has willfully abused DEP’s trust, support, and advice. In his most recent status report, signed by him and filed by his attorney just ten days ago, the Chief Restructuring Officer affirmatively misrepresented his discussions and the status of matters with DEP in material ways in an apparent attempt to mislead the Court, creditors, and other parties in interest, including the public and the press. In that report, the Chief Restructuring Officer stated unequivocally that “the CRO and WVDEP agreed in principle that with the removal of an additional approximately 200 cubic yards of soil from the MCHM Footprint, essentially all soil from the MCHM Footprint (down to a previously existing clay cap on the site at approximately 3 feet in depth) will have been removed from the site.” Status Report [Doc 780] at p. 2. He further stated that he had submitted a workplan containing certain “additional remediation actions” to WVDEP under the Voluntary Remediation Agreement. Id. As the Chief Restructuring Officer knew, neither statement was true, and DEP’s counsel immediately sent an email to Freedom’s counsel advising him that both statements “affirmatively misrepresent entirely the status between Freedom and DEP.” Simply stated, Freedom had never even made a proposal with regard to the removal of soil or any of the other “additional remediation actions,” and quite obviously DEP could never have entered into any 13 Case 2:14-bk-20017 Doc 793 Filed 05/04/15 Entered 05/04/15 11:59:58 Document Page 14 of 18 Desc Main “agreement in principle,” even if the VRP embodied such a concept (which it does not). The Chief Restructuring Officer, moreover, never corrected the misrepresentations contained in his status report even after DEP pointed them out, although DEP notes that the disclosures regarding the status with DEP contained in the amended Chapter 11 plan and disclosure statement differ materially from those contained in the status report. See Amended Disclosure Statement [Doc 787] at pp. 19-20. 10 40. Having now lost all faith in the Chief Restructuring Officer’s ability to propose an acceptable remediation plan and to deal openly and honestly with DEP, DEP has determined that the time has come to move on. 41. Freedom currently has a licensed remediation specialist and environmental consultants capable of completing the necessary steps for Freedom to remain in the Voluntary Remediation Program and see the remediation process through to completion. Indeed, it is the licensed remediation specialist who is directly responsible under the Program for compliance with, and the implementation of, the obligations under the VRP, agreement, and plan. DEP further believes that Freedom’s licensed remediation specialist has the necessary qualifications, has an understanding of what the Program and Freedom’s participation therein requires, and can implement the plan and Program and obtain a certificate of completion, if only it had the requisite authority and funding therefor. 42. DEP believes that, instead, the Chief Restructuring Officer tied the hands of the licensed remediation specialist and Freedom’s environmental consultants. Quite obviously, the Chief Restructuring Officer flatly refuses to commit the funds that are available and necessary to 10 The disclosure statement still contains, in DEP’s views, material misstatements. Contrary to the statement that “[t]he nature and extent of the response by WVDEP is unknown at this time” (Amended Disclosure Statement at p. 20), the Chief Restructuring Officer knows full well both the nature and extent of DEP’s objections to the Chief Restructuring Officer’s remediation plan to date and knows full well that the “amended interim remediation plan” he submitted only on Friday remains inadequate and unacceptable. Indeed, his bankruptcy counsel effectively acknowledged the same in his email to DEP on Friday morning. See Exhibit A. 14 Case 2:14-bk-20017 Doc 793 Filed 05/04/15 Entered 05/04/15 11:59:58 Document Page 15 of 18 Desc Main enable the licensed remediation specialist to perform the obligations under the VRP. And, indeed, DEP notes that the Chief Restructuring Officer admittedly withheld, and DEP fears may be continuing to withhold, court-approved compensation of ARCADIS and the licensed remediation specialist, as he has pursued negotiations of his proposed amended Chapter 11 plan and his scheme to extract concessions from DEP. See Motion of Environmental Consultant ARCADIS U.S., Inc. [Doc 707]; Statement of Chief Restructuring Officer [Doc 723]. 43. As this Court well knows, DEP has studiously and intentionally sought to remain above the fray and out of this Court in this case to allow the Chief Restructuring Officer and his retained professionals to perform the appropriate functions of the debtor in possession and to ensure DEP’s ability to perform its regulatory functions. That approach, despite the obvious delay in remediating the site, appeared to work for most of this case. But it clearly appears to DEP that the Chief Restructuring Officer has failed and refused at this critical hour and juncture to fully and faithfully perform the functions and responsibilities of the debtor in possession in complying with the law and, instead, has sought to further the interests of Freedom’s retained professionals, including himself, at the expense of the remediation required by law. Plainly stated, the Chief Restructuring Officer has become an impediment to remediation and compliance with applicable law. To protect and preserve the health, safety, and welfare of the residents of this State and ensure Freedom’s compliance with the law, DEP has been forced, twice now, to enter its appearance and seek affirmative necessary relief of this Court. 44. To provide for Freedom’s continued participation in the VRP and ensure its compliance with applicable law despite the Chief Restructuring Officer’s obvious failings, DEP requests that this Court 15 Case 2:14-bk-20017 Doc 793 Filed 05/04/15 Entered 05/04/15 11:59:58 Document Page 16 of 18 Desc Main a. delay consideration of the amended Chapter 11 plan until Freedom complies in full with its obligations under the Voluntary Remediation Program or the DEP Consent Order; b. direct ARCADIS, the licensed remediation specialist, to i. undertake and ensure Freedom’s compliance in full with the requirements of the Voluntary Remediation Program; ii. undertake and ensure Freedom’s compliance in full with the DEP Consent Order and all applicable environmental laws, regulations, and orders; and iii. promptly remediate the Etowah site in accordance therewith; c. direct the Chief Restructuring Officer to transfer $1 million to an account established by and under the control of the licensed remediation specialist to fund his remediation efforts, with any balance remaining after receipt of a certificate of completion to be returned to Freedom’s estate; and d. direct the Chief Restructuring Officer and all of Freedom’s other retained professionals to cooperate fully with ARCADIS and refrain from interfering in any way with the remediation or DEP’s supervision over the remediation and the licensed remediation specialist. 11 45. DEP submits that the foregoing actions are necessary in order to ensure Freedom’s participation in the Voluntary Remediation Program and its compliance with the law and are consistent with the interests of the estate and creditors, as they promise to maximize the distributions to creditors under a confirmable Chapter 11 plan. 11 As an alternative, this Court may wish to appoint a Chapter 11 trustee pursuant to Section 1104(a) of the Bankruptcy Code or an examiner with enhanced powers pursuant to Sections 1104(c) and 1106(b) of the Bankruptcy Code. 16 Case 2:14-bk-20017 Doc 793 Filed 05/04/15 Entered 05/04/15 11:59:58 Document Page 17 of 18 Desc Main WHEREFORE, DEP respectfully requests that this Court enter an order denying the motion for authority to solicit acceptances of the amended Chapter 11 plan, temporarily delaying further consideration of the amended Chapter 11 plan, and directing the immediate remediation of the Etowah site as set forth above, and grant DEP such other and further relief as is just. Dated: May 4, 2015 BAILEY & GLASSER, LLP By: /s/ Kevin W. Barrett Kevin W. Barrett (admitted pro hac vice) Michael B. Hissam BAILEY & GLASSER LLP 209 Capitol Street Charleston, West Virginia 25301 Telephone: (304) 345-6555 Facsimile: (304) 342-1110 kbarrett@baileyglasser.com mhissam@baileyglasser.com Attorneys for the West Virginia Department of Environmental Protection 17 Case 2:14-bk-20017 Doc 793 Filed 05/04/15 Entered 05/04/15 11:59:58 Document Page 18 of 18 Desc Main CERTIFICATE OF SERVICE I hereby certify that on May 4, 2015, I caused the WEST VIRGINIA DEPARTMENT OF ENVIRONMENTAL PROTECTION’S OBJECTION TO DEBTOR’S MOTION TO PROCEED WITH PLAN SOLICITATION AND CONFIRMATION AND CROSSMOTION FOR ORDER DIRECTING REMEDIATION to be filed with and uploaded to this Court’s CM/ECF system, which will send notification of such filing to all CM/ECF participants. /s/Kevin W. Barrett 18