W.R. Grace Accused of Hiding Cancer Risk

W.R. Grace Accused of Hiding Cancer Risk

February 7, 2005

By Bob Anez, Associated Press Writer

Missoula, Mont. - W.R. Grace and Co. and seven high-ranking employees knew a Montana mine was releasing cancer-causing asbestos into the air and tried to hide the danger to workers and townspeople, according to a federal indictment unsealed Monday. More than 1,200 people became ill, and some of them died, prosecutors said.

The asbestos was naturally present in a vermiculite mine operated by Grace in the small town of Libby for nearly 30 years.

The federal grand jury said that top Grace executives and managers kept secret numerous studies spelling out the risk the cancer-causing asbestos posed to its customers, employees and Libby residents.

The indictment also accused Grace and Alan Stringer, former manager of the now-closed mine, of trying to obstruct efforts by the U.S. Environmental Protection Agency to investigate the extent of asbestos contamination in the Libby area beginning in 1999. Additional charges in the indictment include wire fraud and violating the federal Clean Air Act.

"A human and environmental tragedy has occurred in Libby. This prosecution seeks to hold Grace and some of its executives responsible for the misconduct alleged in this indictment," Bill Mercer, the U.S. attorney for Montana, said at a news conference in Missoula.

Lori Hanson, a special agent with the Environmental Protection Agency, called the allegations against Grace and its executives "one of the most significant environmental indictments in our history."

The company, based in Columbia, Md., did not immediately comment Monday on the charges. However, Grace disclosed last October that it was under investigation.

In a statement, Grace said it had not been served with the indictment and couldn't comment at length, but added that it "categorically denies any criminal wrongdoing."

"We are surprised by the government's methods and disappointed by its determination to bring these allegations," the company said. "And though court rules prohibit us from commenting on the merits of the government's charges, we look forward to setting the record straight in a court of law."

Grace filed for bankruptcy protection in April 2001 after it was overwhelmed by asbestos-related injury lawsuits.

Asbestos contamination in Libby came to light in 1999 after national news reports first linked the pollution from a nearby vermiculite mine to the deaths and illnesses of area residents. The vermiculite ore was used in a number of household products, most notably a common home insulation. The ore, however, contained naturally occurring tremolite asbestos, a carcinogen.

The EPA began its investigation shortly after news of the asbestos-related deaths became public. Since then, the agency declared the area a Superfund site and has spent more than $55 million on cleanup so far.

Grace has appealed a federal judge's ruling that it must repay the EPA that entire amount for cleanup. That dispute is ongoing.

In addition to the company and Stringer, those named in the indictment are Henry Eschenbach, former health official for a Grace subsidiary; Jack Wolter, a former executive for Grace's construction products division; William McCaig, former general manager of the Libby mine; Robert Bettacchi, a senior vice president of Grace; O. Mario Favorito, chief legal counsel for Grace; and Robert Walsh, former Grace vice president.

The company could face a fine of up to $280 million, twice the amount of after-tax profits the government alleges W.R. Grace realized from the Libby mine, according to the Justice Department.

Stringer could be sentenced to as many as 70 years in prison, while Wolter and Bettacchi face maximum prison terms of 55 years. The other defendants could get 5 years in prison.

Les Skramstad, a Libby resident and former mine worker who was diagnosed with asbestosis nine years ago, said he was pleased criminal charges had finally been filed.

"This wasn't something that happened to us. This was something that was done to us," said Skramstad, who attended Monday's news conference.

Skramstad, 68, said he worked in the mine for 2 1/2 years and believes he not only contracted asbestosis there, but brought home asbestos fibers that also sickened his wife and two children.

All of them now have asbestosis, Skramstad said.

"They should have to pay," Skramstad said of the defendants. "They will never have to pay like we did, because it won't cost them their lives."

The government claims that not only did the defendants keep secret the health dangers posed by the vermiculite mined at Libby, they hampered federal government efforts to protect the public from such risks.

As early as 1976, the company knew of lung health problems among its employees at the mine, according to the indictment.

Grace executives also had reports or studies warning of the dangers of asbestos vermiculite exposure in 1977, 1980, 1981, 1982, the indictment alleged. At one point, it said, Eschenbach responded to one of the studies by writing in a memo: "Our major problem is death from respiratory cancer. This is no surprise."

Despite having that information, the indictment said, Grace officials told the EPA in 1983 that there was no indication their products posed a substantial threat to human health.

The company, knowing of the dangers from its product, provided vermiculite for a junior high school running track and as a base for an ice rink, the indictment said. It said Grace also sold or leased some of its contaminated properties to local residents for homes and businesses, for baseball fields and for city use.

When the EPA arrived in 1999, company officials lied about providing vermiculite insulation to local residents for their homes and businesses and failed to reveal the vermiculite was used on the school's running track, the Justice Department said.

As late as April 2002, in response to the EPA declaring a public health emergency in Libby, the company still insisted its vermiculite was not a risk to the environment and human health, the indictment said.

Grace shares fell 3 cents Monday to close at $11.45 on the New York Stock Exchange. They lost another 45 cents in the extended session.