Grand Jury Indicts WR Grace Over Asbestos Contamination

W.R. Grace and Co. (GRA) 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 (search) was naturally present in a vermiculite (search) 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 Environmental Protection Agency (search) to investigate the extent of the asbestos contamination beginning in 1999, when a study by the Seattle Post-Intelligencer linked asbestos from the mine to nearly 200 deaths and hundreds of illnesses.

The newspaper's study was based on interviews with doctors in several states.

The EPA, which has never disputed the findings of the study, has since declared the area a Superfund site and has spent more than $55 million on cleanup so far.

"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," said Bill Mercer, the U.S. attorney for Montana.

Grace, based in Columbia, Md., said in a statement 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."

Also named in the indictment were 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 made from the Libby mine, according to the Justice Department. Grace filed for bankruptcy protection in April 2001 after it was overwhelmed by asbestos-related lawsuits.

Stringer could be sentenced to as many as 70 years in prison, while Wolter and Bettacchi face up to 55 years. The other defendants could get five years in prison.

Les Skramstad, 68, a former miner who was diagnosed with the chronic lung disease asbestosis nine years ago, said he was pleased 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 said he worked in the mine for 21/2 years and believes he brought asbestos fibers home with him. His wife and two children also suffer from asbestosis.

"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."

Grace bought the mining operation — which once supplied more than 80 percent of the world's vermiculite — in 1963 and shut it down in 1990. According to the indictment, the company knew of lung problems among its employees as early as 1976.

Grace executives also had access to reports or studies warning of the dangers of asbestos vermiculite exposure throughout the late 1970s and early '80s, 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 the information, Grace officials told the EPA in 1983 that they knew of nothing to indicate their products posed a substantial threat to human health, according to the indictment.

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 skating rink, the indictment said. It said Grace also sold or leased some of its contaminated properties for homes and businesses, baseball fields and city use.

When the EPA began its investigation in 1999, company officials lied about providing the insulation to local residents and failed to reveal that 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 is a leading global supplier of chemicals, building materials, sealants and coatings. Libby is about 130 miles northwest of Missoula near the Canadian border.