The United States has entered into a deal with the Kerr-McGee Corp. and its parent Anadarko Petroleum Corporation, in a fraudulent conveyance case brought by the United States and co-plaintiff Anadarko Litigation Trust.
The defendants agree to pay $5.15 billion to settle the case, of which approximately $4.4 billion will be paid to fund environmental cleanup and for environmental claims. This is the largest environmental enforcement recovery ever by the Department of Justice and the Environmental Protection Agency.
The bankruptcy court in New York City previously found in December 2013 that the historic Kerr-McGee fraudulently conveyed assets to New Kerr-McGee Corp to evade its debts, including its liability for environmental cleanup at contaminated sites around the country.
The court found that Old Kerr-McGee transferred assets with the intent to hinder or delay creditors, in particular environmental creditors, and also transferred those assets for less than their fair value, which left it insolvent, unable to pay its debts when they came due, and under capitalized.
The bankruptcy court had previously found, in December 2013, that the historic Kerr-McGee Corporation (“Old Kerr-McGee”) fraudulently conveyed assets to New Kerr-McGee to evade its debts, including its liability for environmental cleanup at contaminated sites around the country. Pursuant to the settlement agreement, the defendants agree to pay $5.15 billion to settle the case, of which approximately $4.4 billion will be paid to fund environmental clean-up and for environmental claims. This is the largest environmental enforcement recovery ever by the Department of Justice.
Old Kerr-McGee operated numerous businesses, which included uranium mining, the processing of radioactive thorium, creosote wood treating, and manufacture of perchlorate, a component of rocket fuel. These operations left contamination across the nation, including radioactive uranium waste across the Navajo Nation; radioactive thorium in Chicago and West Chicago, Illinois; creosote waste in the Northeast, the Midwest, and the South; and perchlorate waste in Nevada.
In the years prior to 2005, Old Kerr-McGee concluded that the liabilities associated with this environmental contamination were a drag on its business, the exploration and production of oil and gas. With the intent of evading these and other liabilities, Old Kerr-McGee created a new corporate entity – defendant New Kerr-McGee – and, through a scheme executed in 2002 and 2005, transferred its valuable oil and gas exploration assets to the new company. The legacy environmental liabilities were left behind in the old company, which was re-named Tronox, and spun off as a separate company in 2006. Because of these transactions, Tronox was rendered insolvent and unable to pay its environmental and other liabilities. In 2009, Tronox went into bankruptcy.
“If you are responsible for 85 years of poisoning the earth, then you are responsible for cleaning it up,” said U.S. Attorney Bharara. “That’s why this case was brought. And that’s why the defendants are paying a record $5.15 billion — to fund that colossal cleanup and to make things right. The company tried to keep its rewards and shed its responsibilities by playing a corporate shell game, putting its profitable oil-and-gas business in a new entity and leaving behind a bankrupt shell holding the environmental liabilities of the defunct, polluting lines of business. The company tried to cleanse its valuable business from its toxic legacy liabilities. Now the defendants will pay to cleanse the land and water.”
