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Charges rely on company memos

| February 10, 2005 11:00 PM

By Steve Kadel Western News Reporter

The 49-page indictment filed in federal court this week against W.R. Grace and seven employees quotes internal memos from Grace executives outlining options to thwart a government investigation into health risks from the firm¹s asbestos production.

Grace mined vermiculite seven miles northeast of Libby until 1992. Vermiculate from the mine, which was sold as Zonolite attic insulation, was contaminated and has caused asbestos-related cancer in at least 1,200 Libby residents, according to the indictment.

The company and its employees are charged with conspiracy, Clean Air Act violations, wire fraud and obstruction of justice.

The grand jury indictment refers to a 1980 meeting between National Institute of Occupational Safety and Health officials and two high-level Grace employees. The meeting was held to discuss NIOSH¹s proposed epidemiological study of Libby.

Federal attorneys obtained a memo from a Grace employee to defendant O. Mario Favorito, the company¹s chief legal counsel, and copied to defendant Jack Wolter, a former executive for Grace¹s construction products division. It discussed Grace¹s options for responding to the study.

³Obstruct and block, possibly even contesting in the courts,² the memo read. ³As I understand it, we¹d lose and this is not exactly the image we try to project.²

Another tactic was to ³be slow, review things extensively and contribute to delay. This might not be bad policy generally and it is possible that the new Administration¹s policies will make NIOSH more selective in how scarce staff resources are allocated after January 20, 1981.²

Yet another possible tactic mentioned in the memo was to ³attempt to apply influence via congressmen, senators, lobbyists or others to get it turned off. However, it is not necessarily successful, can backfire, and to be effective must be developed over long periods of time due to the trust required.²

Others named as defendants are Alan Stringer, the mine¹s last manager; Robert Bettacchi, a senior vice president of Grace; and Robert Walsh, a former Grace vice president; and Henry Eschenbach, former health official for a Grace subsidiary.

Stringer is charged with three counts of obstruction of justice, two counts of endangerment by violating the Clean Air Act, two counts of wire fraud, and one count of conspiracy. If convicted of all charges he faces up to 70 years in prison.

The indictment alleges that Stringer obstructed the Environmental Protection Agency¹s Superfund clean-up efforts by telling the EPA on-scene coordinator that vermiculite concentrate at Grace¹s export plant and screening plant contained less than 1 percent tremolite asbestos.

In November 1999, according to the indictment, Stringer told the on-site coordinator that past asbestos contamination problems at the Libby mine had been resolved and conditions were safe.

Throughout late 1999 and early 2000 Stringer led EPA employees and Superfund contractors to contaminated sites without disclosing the extent and nature of contamination at the locations, the indictment contends. Stringer also gave false and misleading information to EPA, the charges allege.

Grace faces a fine of up to $280 million, and could be order to pay restitution to the victims.

The company declared its innocence in a news release issued this week.

³Grace categorically denies any criminal wrongdoing,² the company said. ³We are surprised by the government¹s methods and disappointed by its determination to bring these allegations. We look forward to setting the record straight in a court of law.²

Grace added, ³As a company and as individuals, we believe that one serious illness or lost life is one too many. That is why we have taken so seriously our commitment to our Libby employees and the people of Libby.

³The individuals who make up the global Grace team are the best in the world. They care deeply about our customers, about their co-workers and about the communities in which they live and raise their families.

³The entire W.R. Grace team is supportive of the citizens of Libby. We hope that our continued and dedicated support for their long-term health care, combined with their characteristic strength and determination, will help them through these difficult times.²

In 1982, Grace and Eschenbach hired Dr. Richard Monson from the Harvard University School of Public Health to conduct a mortality study of people who worked at the Libby mine from 1950 to 1981. Dr. Monson concluded, and reported to Grace and Eschenbach, that ³an excessive number² of employees had died of respiratory system cancer, including mesothelioma.

Eschenbach gave copies of the report to Grace¹s senior management, including defendants Wolter, Favorito and William McCaig, the mine¹s former manager.

Eschenbach wrote in his memo, ³Our major problem is death from respiratory cancer. This is no surprise.²

Grace officials knew at least by 1977 that products made with vermiculite from the Libby mine were releasing tremolite asbestos fibers into the air, according to the indictment. That¹s because company officials did their own tests which gave that result, the document said.

Despite that, Grace gave away vermiculite materials contaminated with tremolite asbestos to the Libby community without disclosing the material¹s hazardous nature, the indictment noted. The substance was used at the high school and middle school, among other places.

In 1976, Grace contracted with Dr. William Smith of Fairleigh Dickinson University to do animal toxicological studies on tremolite asbestos and vermiculite from the mine.

Dr. Smith provided regular reports to Grace showing progressive evidence of asbestos related lung disease in hamsters used in the study, including a significant incidence of mesothelioma. However, the contract between Grace and Smith prohibited the doctor from publishing results of the study in scientific literature without Grace¹s permission.

The indictment alleges that Grace officials conspired to ³conceal and misrepresent the hazardous nature of the tremolite asbestos contaminated vermiculite, thereby enriching defendants and others. It was a purpose of the conspiracy to increase profits and avoid liability by misleading the government and preventing the government from using its authorities to protect against risks to human health and the environment.

³It was part of the conspiracy that the defendants obstructed, impeded, and frustrated the governmental authorities by withholding information regarding the hazardous nature and friability of the tremolite asbestos-contaminated vermiculite and asserting that the Libby Mine operations and Libby vermiculite posed no risk to public health and safety and the environment.²

U.S. Attorney Bill Mercer said the defendants will receive summonses within four weeks to appear before a magistrate in U.S. District Court in Missoula.

³These people will all be coming in and will be advised of their rights,² Mercer said. ³A trial date will be set, probably within 60 days of that appearance.²

He said the federal Speedy Trial Act requires a trial to be scheduled within 70 days of arraignment. However, Grace and the defendants could postpone the trial date by filing a motion indicating they need more time to prepare, Mercer said.

He called the situation in Libby ³a human and environmental tragedy² and pledged to hold Grace and its executives responsible.

The jury trial would be held in Missoula. If there is a trial, that is. Attorney Jon Heberling of Whitefish, who represents 540 asbestos victims, said the case might wind up with plea bargains.

He added that national media attention from this week¹s indictments could help shape an asbestos bill pending before Congress. At this point, Heberling said, the bill¹s language leaves 80 percent of the Grace victims without funding for medical care.

Eleven of the 15 people now on oxygen due to asbestos cancer don¹t qualify for medical coverage under pending legislation, Heberling said.

³Some people who have died of asbestos cancer didn¹t qualify,² he said. ³The indictment is a step in the right direction but the main issue is people¹s medical care, and we have no solution for that.

³The 9-11 victims got $3 million each, but not Libby because it was done slowly. It¹s the asbestos companies and insurance companies who want to get out of this as cheaply as possible.²

Although respiratory cancer usually takes 20 to 40 years to develop, Heberling said symptoms were detected among some Grace workers in as little as five years.

He believes it will take jail time for some top executives to show that white collar crime won¹t be tolerated.

³White collar crime is very deterrable,² he said.

Still, despite dozens of pages of evidence in the indictment, Heberling says convictions are anything but assured.

³The government has to prove its case,² he said. ³It will be the trial of the century in Montana, if it happens.²