- Associated Press - Tuesday, February 25, 2014

CHARLESTON, W.Va. (AP) - A handful of the hundreds of creditors seeking compensation from the company at the center of West Virginia’s chemical spill that deprived residents of usable tap water for days questioned top executives Tuesday in bankruptcy court.

At a creditors meeting administered by a U.S. Department of Justice official, Freedom Industries President Gary Southern and Chief Financial Officer Terry Cline answered questions on company finances from a federal trustee and fewer than 10 attorneys representing creditors.

About 240 creditors are seeking payback from the company. Many of them are businesses and residents who sued for lost wages and profits, since they were forced to shut down for days without clean water. The bankruptcy filing has frozen the suits temporarily.

After more than a month of bankruptcy proceedings, Freedom Industries announced last week in court that it would wind down its operations.

Southern told reporters after the hearing Tuesday he’s “absolutely committed” to cleaning up environmental damage and finding jobs for 51 employees as the company winds down operations.

“This has been an extremely traumatic event for everybody to deal with, particularly our employees,” Southern said outside Robert C. Byrd U.S. District Courthouse in Charleston.

The company’s environmental cleanup bill topped $911,000 in January after one of its tanks leaked chemicals into the water supply for 300,000 people on Jan. 9. For days, nine counties were told not to use their tap water except for putting out fires or flushing toilets. The water-use ban has been lifted for a month, but many residents are sticking with bottled water.

From the start of last week through mid-March, Freedom Industries company planned for another $1.7 million in various environmental costs, court documents show. Southern said the company had already sold off almost all of its chemicals as it prepares to start demolishing its Charleston facility by March 15, per state orders. It was storing about $5.4 million worth of chemicals as of a Feb. 17 court filing.

In court Tuesday, Southern detailed ties to two companies that received millions of dollars from Freedom Industries in the last year.

Southern said he has been Freedom Industries’ president since a merger in December. Before then, he said he worked as a consultant for the company since 2009 with a firm named Blackwater.

Freedom Industries paid Blackwater $1.2 million in the year leading up to its bankruptcy filing. Southern said he also worked with Enviromine Inc., which received $3.8 million from Freedom Industries over the same year, court documents show. But Southern said he doesn’t have an ownership stake in either.

Enviromine lists Southern as its president in West Virginia corporation records. Southern manages Blackwater Consulting Group LLC in Naples, Fla., near his home in Marco Island, but declined to say if that was the company in question.

“I don’t care to discuss that,” Southern told the Associated Press, regarding ties to Blackwater.

The transfers to Blackwater and Enviromine are part of $6 million Freedom Industries paid to executives and associated companies in the year before filing for bankruptcy, court documents show.

If some of the company’s payments to officers and closely tied companies are deemed out of line, they could be clawed back under bankruptcy law. The money would end up in a pool of Freedom Industries assets available to pay back hundreds of creditors.

Southern has limited his public appearances since the spill. He spoke at a Jan. 10 news conference on site at Freedom Industries, and answered questions in bankruptcy court Jan. 21. He said Tuesday he has basically been living at Freedom Industries headquarters since the spill.

Freedom Industries is next scheduled in court March 4, when it will ask to hire a firm to collect electronic evidence for state and federal investigations and legal proceedings.

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