Asarco’s owner nearly got out of cleanup, some say

WASHINGTON — A 562-foot smokestack that spewed a plume of arsenic, lead and other heavy metals over 1,000 square miles of Washington state’s Puget Sound for nearly a century remains a symbol of the largest environmental bankruptcy in U.S. history.

However, it also tells a cautionary tale of how a company that’s intent on shedding its environmental liabilities could manipulate the nation’s bankruptcy system.

In this instance, Grupo Mexico, S.A. de C.V., tried and failed, according to lawyers and regulators who are close to the case. It took a federal judge, however, to block what some bankruptcy lawyers call a “candy heist” that could have left taxpayers responsible for cleaning up 80 polluted sites in 19 states, a job that initially was estimated to cost $6.5 billion.

The smokestack in Ruston, Wash., once the world’s biggest, has been demolished, as has the copper smelter that fed it. The smelter was owned by Asarco, a century-old mining, smelting and refining company based in Tucson, Ariz., that once was listed on the Fortune 500. Grupo Mexico bought Asarco in 1999.

In court documents, Grupo Mexico has denied that it maneuvered Asarco into bankruptcy in an attempt to evade its environmental responsibilities. Grupo Mexico refused to comment for this story.

“Grupo Mexico tried to use a bankruptcy court to avoid Asarco’s cleanup responsibilities, and they almost got away with it,” charged Sen. Maria Cantwell, D-Wash.

Asarco officially emerged from bankruptcy earlier this month, and Grupo Mexico has paid $1.8 billion in cleanup costs. In addition to claims filed by the federal Environmental Protection Agency, 15 states — including Washington, Oklahoma, Missouri, Colorado, Arizona, New Mexico and Texas — and various Indian tribes and private parties had filed environmental claims against Asarco.

State and federal regulators say they’re more than satisfied.

Unless the laws are changed, however, Cantwell and others say that another company almost certainly will try to manipulate the bankruptcy system the way they charge that Grupo Mexico did.

“This is not what the bankruptcy laws were intended for,” said John Iani, a Seattle lawyer who as a regional head of the Environmental Protection Agency during the George W. Bush administration convinced reluctant Justice Department lawyers that Grupo Mexico was trying to pull a fast one.

Asarco had seen better years when Grupo Mexico bought it for more than $2 billion in a highly leveraged buyout. Owned by one of Mexico’s richest families, Grupo Mexico had its eyes on Asarco’s “crown jewels,” a majority interest in two of the world’s richest copper mines, in a Peruvian desert where it hadn’t rained since the time of the Spanish conquistadors.

From the get-go, Iani and other regulators smelled trouble. They were convinced that Grupo Mexico’s sole goal was to gain control of the Peruvian mines and then nudge Asarco into bankruptcy to avoid billions of dollars in environmental cleanup costs.

“We watched as their lawyers sought to move things offshore,” Iani said. “They were leaving the country, and these sites would have gone orphan.”

Federal lawyers were able to block the transfer of the Peruvian mines to another of Group Mexico’s subsidiaries temporarily. In 2003, however, Grupo Mexico officially bought the mines from Asarco. Less than two years later, Asarco filed for bankruptcy protection.

Over the past four years, the case has unfolded in a bankruptcy court in Corpus Christi, Texas. Early on, Judge Richard Schmidt effectively stripped Grupo Mexico of its control of Asarco and installed an independent board of directors.

Grupo Mexico continued to play a role in the bankruptcy proceedings, but it was unclear how serious it was about reassuming control of Asarco in a reorganization.

While the case was proceeding in Corpus Christi, a separate case was filed in a federal court in Brownsville, Texas. In that case, Asarco alleged that Grupo Mexico had fraudulently stripped it of its interest in the Peruvian mines and taken steps to force it into bankruptcy.

In a stern decision, U.S. District Judge Andrew Hanen agreed and found that Grupo Mexico owed Asarco $8.8 billion for the mines.

Grupo Mexico either would owe $8.8 billion to a new owner of Asarco under a reorganization plan or it could fight to regain control of Asarco for far less.

“In a status conference just weeks before Hanen’s ruling, Grupo Mexico said it wasn’t interested in buying Asarco,” said Elliott Furst, who handled the case as a senior counsel in the Washington state Office of the Attorney General.

Within weeks of Hanen’s ruling, however, Grupo Mexico was in a bidding war for control of Asarco.

In the end Schmidt, the bankruptcy judge, accepted Grupo Mexico’s $2.2 billion plan. In his decision, Schmidt suggested that Grupo Mexico finally offered a serious reorganization plan in an effort to limit its liability in the Peruvian mine case.

Furst and other lawyers, including several representing Asarco, agreed. Justice Department lawyers who handled the federal claims refused to comment.

In the end, Furst said, Washington state was “absolutely satisfied” with the way the case turned out, and it also may have been a wake-up call for federal regulators and Congress.

“It’s an example of how people can skirt their responsibilities, and why we need tougher regulations,” Cantwell said.

Talk to us

More in Local News

Emergency responders surround an ultralight airplane that crashed Friday, Sept. 22, 2023, at the Arlington Municipal Airport in Arlington, Washington, resulting in the pilot's death. (Ryan Berry / The Herald)
Pilot dead in ultralight plane crash at Arlington Municipal Airport

There were no other injuries or fatalities reported, a city spokesperson said.

An example of the Malicious Women Co. products (left) vs. the Malicious Mermaid's products (right). (U.S. District Court in Florida)
Judge: Cheeky candle copycat must pay Snohomish company over $800K

The owner of the Malicious Women Co. doesn’t expect to receive any money from the Malicious Mermaid, a Florida-based copycat.

A grave marker for Blaze the horse. (Photo provided)
After Darrington woman’s horse died, she didn’t know what to do

Sidney Montooth boarded her horse Blaze. When he died, she was “a wreck” — and at a loss as to what to do with his remains.

A fatal accident the afternoon of Dec. 18 near Clinton ended with one of the cars involved bursting into flames. The driver of the fully engulfed car was outside of the vehicle by the time first responders arrived at the scene. (Whidbey News-Times/Submitted photo)
Driver sentenced in 2021 crash that killed Everett couple

Danielle Cruz, formerly of Lynnwood, gets 17½ years in prison. She was impaired by drugs when she caused the crash that killed Sharon Gamble and Kenneth Weikle.

A person walks out of the Everett Clinic on Thursday, Sept. 7, 2023 in Everett, Washington. (Olivia Vanni / The Herald)
The Everett Clinic changing name to parent company Optum in 2024

The parent company says the name change will not affect quality of care for patients in Snohomish County.

Tirhas Tesfatsion (GoFundMe) 20210727
Lynnwood settles for $1.7 million after 2021 suicide at city jail

Jail staff reportedly committed 16 safety check violations before they found Tirhas Tesfatsion, 47, unresponsive in her cell.

William Gore, left, holds the hand of Skylar, 9, in a Baby Yoda sweatshirt as they go for a walk in the rain at Forest Park on Monday, Sept. 25, 2023 in Everett, Washington. (Olivia Vanni / The Herald)
Keep your umbrellas, rain gear handy this week in Snohomish County

The National Weather Service says up to 1½ inches are possible through Wednesday.

The city of Mukilteo is having a naming contest for its new $75,000 RC Mowers R-52, a remote-operated robotic mower. (Submitted photo)
Mukilteo muncher: Name the $75,000 robot mower

The city is having a naming contest for its new sod-slaying, hedge-hogging, forest-clumping, Mr-mow-it-all.

In this photo posted to the Washington state Department of Ecology website and taken by the U.S. Coast Guard, people watch as emergency crews respond to the Walla Walla passenger ferry, which ran aground near Bainbridge Island west of Seattle, Saturday, April 15, 2023. (Lt. Cmdr. Brian Dykens/U.S. Coast Guard via AP)
Edmonds-Kingston shuffle: 64-car ferry replaces 202-car boat, for now

The system-wide boat swap stems from the vessel Walla Walla out of service for four weeks for repairs.

Most Read