These are extracts from a recent submission to the U.S. Bankruptcy Court filed by the legal firm of PILLSBURY WINTHROP SHAW PITTMAN LLP, Counsel for the Official Committee of Equity Holders of Solutia Inc., objecting to Solutia Inc.'s Motion for Approval of the Monsanto and Retiree Settlement.
The full submission can be found here
1. The Motion repeats the same theme that propelled Solutia into bankruptcy in the first place: a sweetheart deal that benefits Monsanto while permanently burdening Solutia with hundreds of millions of dollars in Legacy Liabilities, which it played no role in creating.
...In an effort to cleanse its balance sheet, Monsanto strapped Solutia with environmental and tort liabilities ranging from $2.1 billion to $5.3 billion.
Monsanto used the businesses that became Solutia as an "'ATM,' churning out dollars for biotech R&D."
COUNTERSTATEMENT OF FACTS
I. Monsanto Created Solutia As A Vehicle To Dump Massive Environmental Liabilities Generated Decades Before The Spinoff.
21. While the manufacture of these infamous and dangerous chemicals provided Monsanto with massive profits for decades, those profits were artificially inflated because of Monsanto's ability to defer and, therefore, avoid the cost of any environmental controls or clean-ups. Monsanto's manufacture of these pollutants occurred largely prior to the 1970's, when most of the current federal and state environmental laws were enacted. Following the closure of these chemical operations, Monsanto turned a blind eye and delayed implementing costly remediation plans as it continued to divert capital dollars to Life Sciences.
V. Old Monsanto Made Misleading Public Disclosures Regarding The Spinoff.
38. Monsanto's 1996 10-K, its 1997 10-Qs and its July 1997 proxy statement were all misleading and inaccurate. These SEC filings made no mention of the true range of toxic tort liability, remediation and NRD claims for which it was reasonably possible for Monsanto to assess in 1997... To the contrary, these SEC filings made unrealistically optimistic statements about the pending toxic tort cases related to Monsanto's PCB pollution.
39. Incredibly, despite the truth revealed in its own documents, Monsanto had the audacity to state in its proxy statement:
The Company believes it has meritorious defenses to all these [toxic tort] matters, including lack of any physical injury or property damage to plaintiffs, lack of any imminent or substantial endangerment to health or the environment, and lack of negligence or improper conduct on the Company's part.
104. Monsanto's "head in the sand" conduct at Anniston is exhibited by the deposition testimony of Alan Faust, the Monsanto project manager who oversaw all aspects of the PCB investigation at Anniston. There is no individual who should have been more knowledgeable about the economic risks surrounding Monsanto's PCB liabilities than Mr. Faust. Mr. Faust's testimony reveals that for all intents and purposes, Monsanto had a "don't ask, don't tell" policy when it came to the investigation and disclosure of PCB contamination.
Q: And so my question is at any time prior to the spin [the Spinoff of Solutia is a separate company from Monsanto], did anyone from Monsanto try to estimate the mass of PCBs that was discharged with that wastewater that ultimately reached Snow Creek while the PCB operations at Anniston were ongoing?
A: I don't recall.
Q: Do you recall whether at any time prior to the spin there had been anyone at Monsanto that had attempted to estimate the air emissions from the PCB operations while they were ongoing at Anniston?
A: Not to my knowledge.
Q: And are you aware of anyone at Monsanto at any time prior to the spin that would have calculated the amount of PCB waste that would have been generated as part of the PCB operations that went into the landfills?
A: I don't recall any specific knowledge.
Q: At the time of the spin or at any time prior to the spin, had Monsanto made any efforts to remediate sediments at Choccolocco Creek?
A: Not that I'm aware of.
Q: At the time of the spin, did Monsanto have sufficient data to affirmatively conclude that PCBs in the sediments in Choccolocco Creek were not posing an imminent or substantial threat to the environment?
A: I don't recall.
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Q: At the time of the spin or any time prior to the spin, was there sufficient knowledge that Monsanto had to make remediation decisions with respect to soils . . . that were potentially contaminated with PCBs in Choccolocco Creek?
A: It was at that time we had we had there was sampling that was done by the state, we had information from the fish, so we had a we had a general knowledge of the fact that there were PCBs in Choccolocco Creek.
See Lucia Ex. 41, Faust Dep. at 18:6-25; 19:1-16; 23:11-15; 25:9-25; 26:1-2.
105. Monsanto's willful ignorance was diametrically opposed to what it was representing to investors at the time of the Spinoff. In its July 14, 1997 proxy statement, Monsanto represented that it had maintained long-term environmental programs at its manufacturing facilities designed to prevent and remediate contamination. See discussion supra at 36-37; 42-43. Therefore, Monsanto should be stopped from blithely asserting ignorance as a defense to its misrepresentation of the economic risks associated with the Legacy Liabilities assigned to Solutia. Monsanto intentionally disregarded mountains of evidence then in existence and misled the public when making its government-mandated disclosures prior to effectuating the Spinoff. It is reasonable to conclude that investors relied on Monsanto's assurance that it had maintained a long-term dedication to preventing and remediating existing contamination. It is also reasonable to conclude that investors placed a high level of confidence in Monsanto's quantification of its Legacy Liabilities because of its claim that it had maintained long-term programs. Because Monsanto's claims were false, and because Monsanto failed to disclose its massive environmental liabilities, the picture painted for investors was bogus.