Kerr-McGee Corp. fraudulently shifted hundreds of millions of dollars of environmental liabilities into a subsidiary company before spinning off the now-bankrupt chemical producer, the U.S. government claims in a civil complaint filed this week in federal bankruptcy court.
The former subsidiary, Oklahoma City-based Tronox Inc., filed for bankruptcy in January and made similar accusations in a civil filing earlier this month against Kerr-McGee and Anadarko Petroleum, which bought Kerr-McGee in 2006. The U.S. government motion referred to Tronox’s complaint as "a compelling account of corporate greed.”
Anadarko spokesman John Christiansen said all relevant details of the Tronox spinoff were revealed in public filings before Tronox was separated from Kerr-McGee.
"Anadarko conducts its business with the utmost integrity, and all of the information associated with Tronox was fully disclosed in Kerr-McGee’s and Tronox’s SEC (U.S. Securities and Exchange Commission) filings prior to the initial public offering,” Christiansen said.
The accusation
Lev Dassin, acting U.S. attorney for New York’s Southern District, said Kerr-McGee’s transfer of environmental debts into Tronox and removal of assets from Tronox were "fraudulent conveyances” under the Federal Debt Collection Procedures Act.
"The complaint seeks to reverse those transfers, or to obtain a judgment from Anadarko and Kerr-McGee for the amounts of those (environmental liability) debts,” Dassin said in a statement.
Oklahoma City-based Kerr-McGee, which accumulated large environmental, tort and employee benefit liabilities associated with far-flung interests dating back to the 1920s, launched a reorganization plan in 2001 dubbed "Project Focus” to shift those obligations into Tronox and create a "clean” Kerr-McGee, the government complaint said.
In 2006, five months after Tronox became an independent company, Anadarko bought Kerr-McGee for $18 billion.
In 2005, the Environmental Protection Agency demanded $178 million from Kerr-McGee for cleanup costs associated with a former creosote plant in New Jersey. Last year, the EPA sued Tronox for $283 million for costs related to cleanup of that site. Tronox, in its complaint, said Kerr-McGee knew the New Jersey plant was "just the tip of the iceberg and that it would face similar potential liability at numerous other sites.”
Tronox, before its bankruptcy, spent $148 million in environmental costs of former Kerr-McGee sites that had no relation to Tronox’s chemical business, the government motion said. Kerr-McGee established a $100 million fund to help pay for legacy liabilities, but limited Tronox’s ability to access the money such that Tronox has been able to use only about $4 million from that fund, Tronox claimed.
Joining forces
One potential purchaser of Tronox offered $900 million less for the company if it included the legacy liabilities Kerr-McGee had shifted to its subsidiary, the Tronox complaint said.
As part of "Project Focus,” Kerr-McGee also stripped valuable assets out of the chemical subsidiary, including $537.1 million in proceeds from a $550 million debt offering Tronox was required to pay off, the government filing said. Kerr-McGee also kept the $224.7 million raised in Tronox’s initial public offering, and retained 23 million shares of Tronox stock, the complaint said.
Tronox, in its earlier filing, said Kerr-McGee’s actions hamstrung the chemical company and doomed it to failure.
The government is seeking court approval to intervene in Tronox’s case against Anadarko and Kerr-McGee.
Federal officials have been investigating the fraud allegations against Kerr-McGee "for some time,” and has struck a deal with Tronox to "join forces” against Kerr-McGee and Anadarko, the complaint said.
A hearing is scheduled on the U.S. government motion for June 9 in New York.
from the oklahoman
The former subsidiary, Oklahoma City-based Tronox Inc., filed for bankruptcy in January and made similar accusations in a civil filing earlier this month against Kerr-McGee and Anadarko Petroleum, which bought Kerr-McGee in 2006. The U.S. government motion referred to Tronox’s complaint as "a compelling account of corporate greed.”
Anadarko spokesman John Christiansen said all relevant details of the Tronox spinoff were revealed in public filings before Tronox was separated from Kerr-McGee.
"Anadarko conducts its business with the utmost integrity, and all of the information associated with Tronox was fully disclosed in Kerr-McGee’s and Tronox’s SEC (U.S. Securities and Exchange Commission) filings prior to the initial public offering,” Christiansen said.
The accusation
Lev Dassin, acting U.S. attorney for New York’s Southern District, said Kerr-McGee’s transfer of environmental debts into Tronox and removal of assets from Tronox were "fraudulent conveyances” under the Federal Debt Collection Procedures Act.
"The complaint seeks to reverse those transfers, or to obtain a judgment from Anadarko and Kerr-McGee for the amounts of those (environmental liability) debts,” Dassin said in a statement.
Oklahoma City-based Kerr-McGee, which accumulated large environmental, tort and employee benefit liabilities associated with far-flung interests dating back to the 1920s, launched a reorganization plan in 2001 dubbed "Project Focus” to shift those obligations into Tronox and create a "clean” Kerr-McGee, the government complaint said.
In 2006, five months after Tronox became an independent company, Anadarko bought Kerr-McGee for $18 billion.
In 2005, the Environmental Protection Agency demanded $178 million from Kerr-McGee for cleanup costs associated with a former creosote plant in New Jersey. Last year, the EPA sued Tronox for $283 million for costs related to cleanup of that site. Tronox, in its complaint, said Kerr-McGee knew the New Jersey plant was "just the tip of the iceberg and that it would face similar potential liability at numerous other sites.”
Tronox, before its bankruptcy, spent $148 million in environmental costs of former Kerr-McGee sites that had no relation to Tronox’s chemical business, the government motion said. Kerr-McGee established a $100 million fund to help pay for legacy liabilities, but limited Tronox’s ability to access the money such that Tronox has been able to use only about $4 million from that fund, Tronox claimed.
Joining forces
One potential purchaser of Tronox offered $900 million less for the company if it included the legacy liabilities Kerr-McGee had shifted to its subsidiary, the Tronox complaint said.
As part of "Project Focus,” Kerr-McGee also stripped valuable assets out of the chemical subsidiary, including $537.1 million in proceeds from a $550 million debt offering Tronox was required to pay off, the government filing said. Kerr-McGee also kept the $224.7 million raised in Tronox’s initial public offering, and retained 23 million shares of Tronox stock, the complaint said.
Tronox, in its earlier filing, said Kerr-McGee’s actions hamstrung the chemical company and doomed it to failure.
The government is seeking court approval to intervene in Tronox’s case against Anadarko and Kerr-McGee.
Federal officials have been investigating the fraud allegations against Kerr-McGee "for some time,” and has struck a deal with Tronox to "join forces” against Kerr-McGee and Anadarko, the complaint said.
A hearing is scheduled on the U.S. government motion for June 9 in New York.
from the oklahoman
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